11 Mar 2009

BoE to start pumping money into UK economy

12:48 pm on 11 March 2009

The Bank of England effectively begins printing money on Wednesday to try to pull the British economy out of recession.

The BoE is offering to buy 2 billion pounds of government bonds in a process known as quantitative easing.

It will be only the first step in a 75 billion pound programme of buying assets which was announced by the bank last week. Interest rates are now at a record low of 0.5%.

The BoE will purchase the securities via a reverse auction, which means sellers, rather than the buyer, determine the price. It is relying on investors such as life assurance companies, pension funds and investment funds to sell their bonds.

Economists said the object is to put money into the economy.

The bank will hold only one auction this week, but there will be two per week from next week on Mondays and Wednesdays.