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So did quantitative easing work?

Yesterday's news that the Bank of England will be suspending the quantitative easing program was very much expected by analysts but now a review of the quantitative easing program can begin in earnest. In simple terms, the quantitative easing program allowed financial institutions to use various assets to "borrow" liquidity from the Bank of England. This allowed financial institutions to use assets which may not have been easy to liquidate thereby increasing the overall liquidity in the UK financial marketplace.

There is no doubt that quantitative easing has had an impact upon liquidity levels and while the economy is operating at a higher level than it was when quantitative easing was introduced there are concerns about how the economy will react in the short term. Many analysts believe we could see a short-term fallback in economic activity, due to pressure on liquidity levels, but at some point the UK economy needs to stand on its own 2 feet.

It is interesting to see that the Bank of England has left open the possibility of reintroducing the quantitative easing program in the future despite the fact that the initial £200 billion set aside has been utilised in full. The next few months will be very important for the UK economy, the Bank of England and the government.

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