UK pumps another £50bn into its flagging economy
The Bank of England yesterday announced a third dose of electronic-money creation to boost the flagging UK economy.
Expressing concern that the eurozone crisis, together with Chancellor George Osborne's austerity programme and a rationing of credit, will stifle growth in 2012, the bank said it would expand its quantitative easing programme (QE) by £50bn (€59.5bn) over the next three months.
It has now pumped £325bn, equivalent to about one-fifth of GDP, into the financial system since Britain plunged into recession three years ago.
The bank's nine-strong monetary policy committee said the move -- which was heavily criticised by groups representing savers and pensioners -- was justified by the weak prospects for the UK and the risk that inflation would drop below the government's 2pc target.
"A gradual strengthening of output growth later this year should be supported by a gentle recovery in household real incomes as inflation falls, together with the continued stimulus from monetary policy," the bank said.
"But the drag from tight credit conditions and the fiscal consolidation together present a headwind. The correspondingly weak outlook for near-term output growth means that a significant margin of economic slack is likely to persist."
The downbeat message from the bank coincided with the publication of official figures showing that manufacturing output rose by a much stronger than expected 1pc in December 2011 and the trade deficit in goods and services in the same month fell to its lowest level since 2003.