Bank of England abstains from extra QE stimulus

The Bank of England has defied expectations by choosing not to extend its stimulus programme of quantitative easing, after injecting £375m into the UK economy.

The move has been welcomed, with Tory MP Brooks Newmark telling that it was “good news [to see] the Bank refraining from further QE”.

In quantitative easing, the Bank creates money electronically in order to buy government bonds in the hope of stimulating the economy. The bank had been expected to undergo a further round of QE due to poor economic indicators.

Minutes from the Monetary Policy Committee meeting in September showed that some members thought more QE was “more likely than not to needed in due course”, with another member arguing that there was a “good case” for yet more QE.

This comes as the Bank of England has decided to keep interest rates at a record low of 0.5% for the 44th consecutive month.

IHS Global Insight’s chief UK and European economist Howard Archer said:

“We are doubtful that the decision marks the end of quantitative easing given that recovery currently looks fragile, feeble and far from guaranteed. Indeed we expect another, and likely final, £50 billion of QE to be enacted in the early months of 2013.”

“Meanwhile, we remain firmly of the view that interest rates will not go below 0.5pc. However, we do not expect any increase in interest rates for at least another two years.”

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