QE extension reveals economy fears

The Bank of England has extended its quantitative easing by another £50 billion, while maintaining the 0.5 per cent base rate today (July 5th).

Fears that the UK economy could be facing a deeper recession unless action is taken may have been decisive in promoting the Bank to take the action, with the minutes of the meeting set to explain this on July 18th.

It means the asset purchase scheme – known as quantitative easing – has created another £375 million that the Bank aims to turn into business credit that will eventually filter through into the wider economy. 

The weakening outlook may see unemployment start rising again soon, which could increase the number of people with severe debt problems as those losing their jobs and owing money may find the loss of income damages their ability to maintain repayments.

In recent months the jobs market has defied gravity, with unemployment falling by 51,000 in the three months to April and employment up by 166,000, according to the Office for National Statistics.

By James Francis