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11/03/2009
Bank Starts 'Printing Money' To Boost Economy
The Bank of England has started pumping newly printed money in an attempt to ease Britain out of recession.
The Bank's Monetary Policy Committee (MPC) has embarked on "quantitative easing" - the process of printing money - in an attempt to boost credit supply and encourage greater lending again from the banks and institutions.
It has also begun offering to buy £2 billion of government bonds - or gilts - from individuals and investment institutions, in the first of a series of auctions which will take place this week.
The MPC hopes those who sell the gilts will place the new money into their accounts with UK banks. This in turn would boost deposit bases and allow them to lend to individuals or companies.
The bank will buy up the bonds through its Asset Purchase Facility, financed so far by the sale of Treasury bills.
The first auction was scheduled to take place at midday today, and two hours later the second so-called 'reverse auction' is scheduled, which would allow banks to participate directly, selling the gilts that they hold to the banks.
These auctions will be held every Monday and Wednesday from now on, and the results of the auctions will be published by the Bank every Friday at 10am.
As the bank has £75 billion in newly-created money to spend, it is thought it will be buying around £5 billion a week on average. However it could increase the size of auctions if the funds are over-subscribed with would-be sellers.
The success of the quantitative easing will depend on the extent of which banks are willing to lend the new money, economists have said.
(JM/BMcC)
The Bank's Monetary Policy Committee (MPC) has embarked on "quantitative easing" - the process of printing money - in an attempt to boost credit supply and encourage greater lending again from the banks and institutions.
It has also begun offering to buy £2 billion of government bonds - or gilts - from individuals and investment institutions, in the first of a series of auctions which will take place this week.
The MPC hopes those who sell the gilts will place the new money into their accounts with UK banks. This in turn would boost deposit bases and allow them to lend to individuals or companies.
The bank will buy up the bonds through its Asset Purchase Facility, financed so far by the sale of Treasury bills.
The first auction was scheduled to take place at midday today, and two hours later the second so-called 'reverse auction' is scheduled, which would allow banks to participate directly, selling the gilts that they hold to the banks.
These auctions will be held every Monday and Wednesday from now on, and the results of the auctions will be published by the Bank every Friday at 10am.
As the bank has £75 billion in newly-created money to spend, it is thought it will be buying around £5 billion a week on average. However it could increase the size of auctions if the funds are over-subscribed with would-be sellers.
The success of the quantitative easing will depend on the extent of which banks are willing to lend the new money, economists have said.
(JM/BMcC)
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