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| Version 6 | Version 7 |
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| Extra £50bn pumped into economy | Extra £50bn pumped into economy |
| (about 1 hour 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. |
| It will take their total spending to £175bn, unexpectedly going over the £150bn set aside by the chancellor. | It will take their total spending to £175bn, unexpectedly going over the £150bn set aside by the chancellor. |
| 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 rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a fifth month. | The rate-setters also decided to keep interest rates unchanged at their historic low of 0.5% for a fifth month. |
| Fragile economy | Fragile economy |
| BBC economics editor Stephanie Flanders said that the Monetary Policy Committee's (MPC) £50bn expansion of the programme had surprised many in the markets. | BBC economics editor Stephanie Flanders said that the Monetary Policy Committee's (MPC) £50bn expansion of the programme had surprised many in the markets. |
| I think they believe that the fragility of the economy right now is such that there's more risk in doing too little than in doing too much Stephanie Flanders, BBC economics editor Is quantitative easing working? | |
| "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," she said. | "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," she said. |
| "It's possible that the Bank of England has already done enough to support the recovery into next year, but no-one knows for sure." | "It's possible that the Bank of England has already done enough to support the recovery into next year, but no-one knows for sure." |
| "I think they believe that the fragility of the economy right now is such that there's more risk in doing too little than in doing too much," she added. | "I think they believe that the fragility of the economy right now is such that there's more risk in doing too little than in doing too much," she added. |
| 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. |
| Bank of England governor Mervyn King had to write a letter to the chancellor asking permission to extend the programme beyond £150bn. | Bank of England governor Mervyn King had to write a letter to the chancellor asking permission to extend the programme beyond £150bn. |
| Alistair Darling wrote back, authorising the extension of the scheme, which is attempting to stimulate the economy by putting more money into circulation. | Alistair Darling wrote back, authorising the extension of the scheme, which is attempting to stimulate the economy by putting more money into circulation. |
| Slower rate | Slower rate |
| WHAT IS QUANTITATIVE EASING? The Bank of England is trying to stimulate the economy. It would normally do this by cutting interest rates, but with rates at 0.5% it has to create new money instead.It gets the new money into the banking system by buying assets from banks.The idea is the banks then lend the money to companies and individuals.Businesses and consumers then spend it - buying goods, paying wages - which helps the economy recover. Quantitative easing explained | |
| 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?' | 'What has changed?' |
| There was some criticism from economists of the MPC's statement. | 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. | "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." | "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. | 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. | 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. | 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. |
| The MPC's statement recognised that the surveys have suggested the bottom of the recession may be near. | The MPC's statement recognised that the surveys have suggested the bottom of the recession may be near. |
| "The pace of contraction has moderated and business surveys suggest that the trough in output is close at hand," it said. | "The pace of contraction has moderated and business surveys suggest that the trough in output is close at hand," it said. |
| 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%. |