Bank carries on printing to escape the doldrums

The Bank of England today stuck to its guns over its dramatic decision to print money to drag the UK out of recession.

It voted to press on with its programme of quantitative easing in which it will pump £75 billion of new money into the economy by buying Government bonds and other assets.

The monetary policy committee also left interest rates unchanged at 0.5%, bringing an end to six months of aggressive cuts which have seen rates tumble from 5% to record lows.

But the City was far from impressed and urged the Bank to give a full public endorsement of the quantitative easing programme.

Bank Governor Mervyn King was accused of undermining the process two weeks ago when he said the full £75 billion may not be spent.

The Bank today said it has made "just over" £26 billion of asset purchases since launching the scheme last month and that it will "continue with the programme". It said "it would take a further two months to complete that programme".

Richard McGuire, a fixed income strategist at RBC Capital Markets, said: "The Bank left rates on hold and, somewhat laconically, reaffirmed both the scale and the speed of the quantitative easing programme.

"On the face of it, neutral for the market, but a disappointment to those expecting a more enthusiastic endorsement in the wake of King's earlier comments, which were perceived to have indicated a limited degree of momentum behind the project."

Sean Maloney, a fixed income strategist at Nomura, said King's earlier comments "caused a lot of confusion and have significantly jeopardised the policy". He said: "Greater clarity is all that's standing between quantitative easing being effective and falling short."

The Bank decided to start printing money after it ran out of room for further interest rate cuts. It initially drove down interest rates on Government bonds as planned but much of the early benefits have since evaporated. It is hoped the funds will be passed on to businesses and consumers to boost spending and stave off a period of deflation.