BoE 'printing money' plan gets off to a flying start

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Although the process of pumping £75 billion into the economy is known as printing money, it in fact involves the Bank buying gilts and other assets from banks and paying for them with newly created money that is wired into their accounts held at Threadneedle Street.

Today was the first time the Bank opened its wallet, offering to buy £2 billion of gilts.

Straight after the starting gun this afternoon, banks were falling over themselves to sell and the Bank received selling offers of more than £10 billion of gilts.

The hope now is that the banks will go out and lend the new money to customers, easing the economic stagnation and preventing deflation.

Matteo Regesta, strategist at BNP Paribas, said: "It went very well - it was a successful first auction."

Today's success suggested the Bank will now offer to buy bigger slugs of assets in future auctions, which will be held on Mondays and Wednesdays. It will tell the market tomorrow of next week's plans.

Market analysts tonight said the huge demand for the new money had saved the Bank from having to pay over the odds for the gilts. In the event, it paid only what the bonds were trading at.

"In a word, these boys are no mugs," said Marc Ostwald, strategist at Monument Securities.