Bank of England keeps UK rates steady

The Bank of England said today that it would expand its quantitative easing programme by £25 billion sterling to help kick-start Britain's recession-hit economy.

The increase brings the central bank's total asset-buying programme to £200 billion, the equivalent of more than 14% of Britain's economic output.

The bank also left interest rates unchanged at a record low of 0.5%, as expected.

Two-thirds of analysts had predicted the Bank of England would expand its asset-buying scheme, but opinion had been split on whether the increase would be £25 billion or £50 billion.

Conflicting signals over the health of Britain's economy had made this week's decision a difficult one to call.

Britain's economy contracted unexpectedly in the third quarter, making the current recession the longest since records began more than 50 years ago, but more forward-looking surveys have painted a brighter picture.

The additional expenditure marks the smallest increase in the policy since it was launched in March and was less than the £50 billion predicted by many economists in the wake of disappointing third quarter figures showing the UK remained in recession.

They said the Bank could be gently easing its way out of QE and forecast today's move could be the final top up of its unprecedented effort to steer the economy back on track and boost lending.

Pressure for a greater boost to QE came after a surprise 0.4% decline in the economy between July and September, indicating the UK had failed to climb out of recession. Major world economies including the US, France and Germany have emerged from recession in recent months, leaving the UK behind.

'The world economy has shown signs of recovery, with a number of emerging market economies experiencing a strong rebound in growth, although global activity as a whole remains significantly depressed,' the Bank said today.

It added that banks' funding conditions had improved, but said 'financial conditions remain fragile'.

Figures showing a 0.9% decline in the bank's preferred measure of money growth in September also raised uncertainty over whether the current level of QE was sufficient.

Economists predicted the bank would now pause in its activity, with some suggesting the next policy change could be an interest rate rise next year.