MercoPress. South Atlantic News Agency

Bank of England to pump extra £ 25 billion to UK economy

Recession is moderating but risks remain

The Bank of England is set to pump an extra £25 billion into the recession-blighted UK economy. The rate-setting Monetary Policy Committee (MPC) is expected to vote to step up its quantitative easing programme - effectively printing more money - while holding interest rates at their record low of 0.5%.

The expansion of QE would take the MPC to the £150 billion limit permitted by the Chancellor - and it may also ask to extend the strategy further.

The latest meeting of the MPC comes amid recent signs over the fragility of the UK's attempts to haul itself out of recession.

According to the Bank's own data, credit conditions remain tight and lending to business fell in April and May - suggesting that the boost to the money supply is having little immediate impact.

David Kern, chief economist at the British Chambers of Commerce (BCC), said QE “must be widened and its scale increased”.

The BCC wants a £50 billion extension to the current programme - taking it to £200 billion - with more private sector debt bought up by the Bank as well as Government bonds.

“Although the recession is moderating, the risks facing small firms across all sectors of the economy are still very acute,” he said.

“QE is not yet achieving its aims. The amount of money held by companies, and lending to businesses, both fell in May. More forceful measures are needed to nurture confidence.”

Revisions to official data showed the economy contracted 2.4% in the first three months of the year - the worst quarter since 1958 and almost equivalent to the entire fall seen during the 1990s recession.