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The Bank of England today looked ready to step up the fight against recession and pump even more money into the economy.
All nine members of the monetary policy committee, led by Mervyn King, voted to leave interest rates at 0.5% and extend the quantitative easing programme by £50 billion to £125 billion at this month's meeting.
But minutes of the meeting published today by the Bank showed the MPC considered printing an extra £75 billion after economic output collapsed in the first three months of the year.
“All members agreed that the programme should be extended this month,” the minutes said.
The Bank, which is desperate to stave off deflation and return inflation to the 2% target, said it was ready to ask the Chancellor to raise the initial upper limit of £150 billion “should economic conditions require it”.
Nick Kounis, an economist at Fortis and former UK Treasury official, said: “They are almost certainly going to use up the final £25 billion, and they've opened up the possibility of moving even higher.”
The dilemna facing the Bank was underlined by news that it thought about not extending quantitative easing at all this month.
The Bank said it was “uncertain” about the impact of the programme and warned “there was a risk that the committee would not be able to identify early enough when it should be withdrawn”.
Such an error could lead to a sharp rise in inflation.
But the Bank said “the recovery was likely to be relatively slow” and said there was “a high probability” inflation will be below 2% for some time.
It said the failure to extend the programme “could harm the public's confidence in the recovery” and added: “The risks of stimulating demand too little at the current time seemed greater than the risks of stimulating it too much.”
Reader views (10)
No wonder our country's credit rating and currency is being downgraded by everything, except by un-important Crash Gordon and Liz Darling.
- Peteo, London NW1, 21/05/2009 14:14
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Should they not print less?! This is devaluing our currency and our future!!!! The Labour guys need removing.
- Georgie, Islington, London, 21/05/2009 13:03
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Printing money IS the same as stealing money from hard working people. The government could turn all your hard earned wealth to zero in a flash, just by printing. You shoudn't expect anything else from a labour government. Ultimately we will be where labour last left us with income tax being imposed at 35% on everything earned over £600, right up to 98% income tax. Its coming..
- Chris, Rochester, 21/05/2009 10:39
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If only we had another government, to rein in this printing and devaluation of sterling! Stop wasting money and raising taxes on people who have to work!!
- Jacqueline, Hampstead, London, 20/05/2009 23:16
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The Bank of England is going to print more money it does not have.
ANY IDIOT CAN SPEND SOMEBODY ELSE'S CASH.
ASK MP's.
- Reuben Camara, Morecambe/Lancaster, 20/05/2009 17:30
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In 2 years time things could become very interesting-sales of wheelbarrows should grow dramatically. 'Lions led by donkeys...'
- Jon Kent, Hertford. UK, 20/05/2009 17:22
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Stagflation here we come.
Thanks Tony Blair, Gordon Brown and the rest of you Labour clowns.
- Dave Davies, Basingstoke, 20/05/2009 15:08
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I guess now is not the best time to buy anything in "Great" Britain... ´The Crash Gordon experimenting has to be stopped!!
- Moy, London, 20/05/2009 14:45
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More bad news for savers and investors in the UK economy... Inflation with a big I! Crash Gordon go away!!
- Steveo, London, NW1, 20/05/2009 14:30
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The CPI is still above Target at 2.3%? Why are they suggesting otherwise. The RPI is not the index used to set rates.
- Bruce, London, 20/05/2009 14:10
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