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| Version 2 | Version 3 |
|---|---|
| Extra £50bn pumped into economy | Extra £50bn pumped into economy |
| (11 minutes later) | |
| The Bank of England's rate-setters have decided to pump another £50bn of new money into the economy in their programme of quantitative easing. | The Bank of England's rate-setters have decided to pump another £50bn of new money into the economy in their programme of quantitative easing. |
| They have spent £125bn so far in their attempts to stimulate the economy by putting more money into circulation. | They have spent £125bn so far in their attempts to stimulate the economy by putting more money into circulation. |
| Bank of England governor Mervyn King had to ask the chancellor's permission to extend the programme beyond £150bn. | Bank of England governor Mervyn King had to ask the chancellor's permission to extend the programme beyond £150bn. |
| The rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a sixth month. | The rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a sixth month. |
| In a statement, they said that the UK recession "appears to have been deeper than previously thought". | In a statement, they said that the UK recession "appears to have been deeper than previously thought". |
| The Bank's policymakers probably believe there is greater risk in doing too little than in doing too much Stephanie Flanders, BBC economics editor Is quantitative easing working? Quantitative easing explained | The Bank's policymakers probably believe there is greater risk in doing too little than in doing too much Stephanie Flanders, BBC economics editor Is quantitative easing working? Quantitative easing explained |
| "But the pace of contraction has moderated and business surveys suggest that the trough in output is close at hand," they added. | "But the pace of contraction has moderated and business surveys suggest that the trough in output is close at hand," they added. |
| Also on Thursday, the European Central Bank decided to keep its interest rates unchanged at 1%. | Also on Thursday, the European Central Bank decided to keep its interest rates unchanged at 1%. |
| 'More to do' | 'More to do' |
| BBC economics editor Stephanie Flanders said that the Monetary Policy Committee's (MPC) £50bn expansion of the programme would surprise many in the markets. | BBC economics editor Stephanie Flanders said that the Monetary Policy Committee's (MPC) £50bn expansion of the programme would surprise many in the markets. |
| "Most expected the MPC to either put the quantitative easing policy on hold or simply spend the remaining £25bn authorised by the chancellor in March. The expansion suggests that the Bank thinks quantitative easing has more to do." | "Most expected the MPC to either put the quantitative easing policy on hold or simply spend the remaining £25bn authorised by the chancellor in March. The expansion suggests that the Bank thinks quantitative easing has more to do." |
| "Clearly the MPC has taken seriously the sharper-than-expected decline in second-quarter economic growth." | "Clearly the MPC has taken seriously the sharper-than-expected decline in second-quarter economic growth." |
| "Despite today's encouraging economic news, the Bank's policymakers probably believe there is greater risk in doing too little than in doing too much." | "Despite today's encouraging economic news, the Bank's policymakers probably believe there is greater risk in doing too little than in doing too much." |
| Following the announcement, the pound gave up much of its recent gains against the US dollar, falling more than a cent to $1.6830. | Following the announcement, the pound gave up much of its recent gains against the US dollar, falling more than a cent to $1.6830. |
| Slower rate | Slower rate |
| There will now be increased focus on the Bank's latest economic projections, which will be published in the quarterly Inflation Report on Wednesday, 12 August. | There will now be increased focus on the Bank's latest economic projections, which will be published in the quarterly Inflation Report on Wednesday, 12 August. |
| The extra £50bn will be spent over the next three months, which is a slower rate of spending than when the programme began in March. | The extra £50bn will be spent over the next three months, which is a slower rate of spending than when the programme began in March. |
| The Bank has said it will have to expand the range of government debt it is prepared to buy. | The Bank has said it will have to expand the range of government debt it is prepared to buy. |
| In its statement, it also noted that "though there are signs that credit conditions may have started to ease, lending to business has fallen". | In its statement, it also noted that "though there are signs that credit conditions may have started to ease, lending to business has fallen". |
| The British Chambers of Commerce picked up the theme, saying that "many viable small firms are finding it difficult to access credit". | The British Chambers of Commerce picked up the theme, saying that "many viable small firms are finding it difficult to access credit". |
| It urged the MPC to buy more debt from companies instead of government debt, adding that "the risks of not persevering with an aggressive policy stimulus are much bigger than the risks of extending the QE programme". | It urged the MPC to buy more debt from companies instead of government debt, adding that "the risks of not persevering with an aggressive policy stimulus are much bigger than the risks of extending the QE programme". |
| 'What has changed?' | |
| There was some criticism from economists of the MPC's statement. | |
| "I'm just struck by how backward looking a lot of it is, focusing on the economy in recession and that there is a large output gap," said Ross Walker, an economist at RBS Financial Markets. | |
| "We knew all that, what has changed? They seem to be giving much more weight to the backward-looking data rather than believing the better surveys." | |
| Many of the recent forward-looking surveys have suggested that parts of the economy have been improving. | |
| Wednesday's survey from the Chartered Institute for Purchasing and Supply, for example, showed the service sector growing at its fastest for 18 months. | |
| At the same time, house prices are now rising, according to the latest survey from the Halifax, while recent surveys by Nationwide and the Land Registry also suggested prices were increasing slightly. |