Quantative Easing: The story so far

The BBC's Hugh Pym breaks down what quantitative easing means and why it's happening.

Link: Quantitaive Easing - the story so far

Money, money, money!

The Bank of England on Thursday announced unprecedented steps to prevent the deepest slump since the 1930s when it unveiled plans to inject up to £75bn into the economy over the next three months.Alarmed by signs that Britain's malfunctioning banking system is starving consumers and businesses of credit, Alistair Darling gave Threadneedle Street clearance to begin creating money – the last-gasp measure used by Japan to end a decade of recession and deflation.The Bank said it would embark on quantitative easing next week, after its monetary policy committee cut the bank rate for the sixth time since the global financial system came close to collapse last Oct­ober. The rate is now 0.5% – a level not seen before in the Bank's 315-year history.
Mervyn King, the Bank's governor, said it was unlikely that bank rate could go any lower and policymakers would shift focus to creating money instead. "We are very close to zero. What we are doing now is switching to injecting money into the economy directly."

Link to The Guardian

Bank creates cash: 'This is the last roll of the dice - an unconventional weapon'

Larry Elliott on quantitative easing - printing money - Audio link

Is the decision to print money right? The experts think so. But ... Link

The end of monetary policy as we know it?

Three former members of the Bank of England's rate-setting committee have urged the central bank to rethink its monetary policy. Dr Deanne Julius, Sushil Wadhwani and Willem Buiter are all part of a new monetary policy forum, set up by Fathom Financial Consulting. The forum is designed to scrutinise the Bank's Monetary Policy Committee (MPC). The former MPC members are now urging the Bank to consider the use of quantitative easing - creating money to buy assets - as a tool for ensuring economic stability. Dr DeAnne Julius told the BBC: "We are clearly at the end of monetary policy as we know it." Link to BBC News

For explanation of Quantitative Easing see earlier blog.

What is Quantitative Easing?

If you have heard the term 'Quantitative Easing' but are unsure what it means then the graphic in today's FT should help. As interest rates reach their lower limit with doubt about the effectiveness of rate cuts, the Bank of England is looking for other measures to stimulate spending in the economy; 'Quantitative Easing' is such a measure. Link