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Bank Of England asset purchase plan underway

It appears as though the initial stages of the Bank of England's £50 billion asset purchase facility should be up and running over the next couple of weeks. However, there are concerns about the longer term situation as the Bank of England is still in discussions with leading city figures about the details. So what exactly will happen?

The initial phase of the £50 billion asset purchase facility will see the Bank of England able to acquire commercial paper, used by companies to borrow money in the short term, as of 13 February. This move is sure to impact upon the short-term credit facilities available to companies throughout the UK with the longer term situation, which would see the Bank of England purchasing bonds or loans in order to inject capital backing the markets, still awaiting an official launch date.

There is no doubt that there are risks associated with the £50 billion asset purchase plan as it could see UK taxpayers sitting on substantial losses if the UK recession continues to gather pace. However, those in the halls of power believe that this latest move has the potential to kick-start the UK money markets which is the one vital element required for recovery. There is some debate as to how long it could take for the move to filter through to the money markets and with every second counting at the moment this is a major concern.

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