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Is the Bank of England set to increase the quantitative easing fund?

Having already spent a significant £75 billion on the quantitative easing program, the small print from last month's MPC meeting seems to indicate that a further £50 billion will be used in the short term and then the bank will revert back to the Treasury for further discussions. Initially the government had put aside £150 billion for the overall of quantitative easing program but many expect this figure to be spent by the end of July at which point additional funds could be requested.

This is something which is starting to cause serious concern amongst economists and investors because so far there has been little or no impact on the economy despite the fact that billions of pounds have been used to increase liquidity. If £150 billion has no impact how high will the UK government and the Bank of England be prepared to go?

The fact that the UK economy contracted by 1.9% in the first quarter of 2009 was a great surprise to many who had expected a levelling off period in the short to medium term. It will be interesting to see how the next quarter compares with the UK Treasury's "optimistic" forecasts released with the budget as this will be the first time these forecasts will be tested in reality.

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