The Bank of England (BoE) has halted its programme of quantitative easing (QE), after Governor Mervyn King announced that it is hopeful that the economy will make a recovery in the latter part of 2012.
The latest round of QE in February this year pumped an additional £50bn in the economy, taking the total size of the programme to £325bn, since the GDP stimulating measure began in March 2009.
But in the face of rising inflation, as well as the double dip recession, the bank decided against any further increases in asset purchases.
It also decided to maintain UK interests at their current level of 0.5% – the lowest ever
The decision not to increase QE did not come as a surprise to many in the industry. Just five out of the 58 economists polled by Reuters felt that the BoE would announce an extension of the programme.
“Under this cloud of doubt the MPC may prefer to hold fire unless a fresh crisis, or more prolonged weakness in demand, makes the case for QE irresistible,” said Simon Hayes, a Barclay’s economist, ahead of the announcement.
Quantitative easing has been widely criticised by a number of consumer groups. Earlier this year Simon Rose, from campaign group Save Our Savers, said QE will have “an appalling impact” on pensioners.
This idea was supported by Joanne Segars, chief executive of the National Association of Pension Funds, who said: “People who are retiring now are finding that annuity rates have been squashed by QE.”
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