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BoE launches more QE – £75 bn in fresh stimulus

, October 6, 2011, 0 Comments

WORLD MARKET : London – Highlighting its concern of global economic tensions threatening the U.K. recovery, The Bank of England(BoE) decided Thursday to restart its program of asset purchases. BoE’s monetary policy committee voted to increase the size of its asset-purchase program, financed by the issuance of central bank reserves, by 75 billion pounds. According to committee, Program will likely take four months to complete and its scale will be kept under review.

Eurozone Debt Crisis

According to BoE governor Mervyn King, in a letter to finance minister George Osborne “Global economic recovery had slowed, and that the euro debt crisis had created severe strains on financial markets. These tensions in the world economy threaten the UK recovery”. After the announcement, the British pound dropped to $1.5373 from $1.5453.

Quantitative easing refers to the policy of boosting the money supply by buying such assets as government and corporate bonds. Instead of lowering short-term rates, which already are close to zero, central banks supply extra money directly. In an effort to get hold of crisis, European Central Bank kept its main interest rate at 1.5% and launched several non-standard measures, including restarting purchases of covered bonds.