Another £75 billion has been pumped into the economy in an attempt to aid recovery. The latest figures are in addition to £200 billion which has already been injected through a quantitative easing programme. Sir Mervyn King has warned that the United Kingdom could be facing the worst monetary crisis since the 1930’s, which is why the Monetary Policy Committee voted to increase the quantitative easing programme.
Interest rates remain at 0.5 percent, although the MPC discussed the option of reducing rates to 0.25 percent. Experts believe that the move to increase quantitative easing is a clear sign that the Bank of England think the UK may be facing a double-dip recession. The Bank of England say that the reason for increasing QE is ‘tensions in the world economy threaten the UK recovery’.
Leaders in business agree with the decision following revelations that the UK has suffered a steep recession and recovery is taking much longer than initially thought. The chief economist of the British Chambers of Commerce, David Kern agreed with the decision, but said that even more needs to be done to support UK businesses. The national chairman of the Federation of Small Businesses, John Walker said:
“It is important that in an attempt to boost short-term demand that small businesses can directly benefit from this cash injection and that the banks use it to decrease the cost of credit and to increase the availability of lending.”
As household spending continues to decrease, it remains to be seen whether the increase in quantitative easing will be enough to boost the UK economy.
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