The Bank of England is looking to the government for approval for their new plans to help boost the supply of money in the economy, with the aim that by using quantitative easing, this will increase the amount of funds available in the UK banking system.

The Bank hopes that this measure will increase the sense of security for commercial banks to increase their lending levels again.

What Does The Bank Intend To Do?

Analysts believe they should start introducing these measures as soon as possible, preferably within the next few days.

It is expected that the plans will include both government and corporate bonds being purchased.

However, in a meeting that took place earlier this month, the move has not been unanimously agreed by all nine members of the Monetary Policy Committee (MPC).

The minutes from the same meeting also show that the members of the MPC voted 8-1 to cut interest rates to 1% later this month.

Will this be enough?

 The Bank is suggesting that cutting interest rates alone again may not be enough to help pull the economy out of the recession and that quantitative easing may be necessary.

The minutes from the meeting said: “to the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy instruments.

“There was a great deal of uncertainty about what would happen to banks’ and building societies’ ability and willingness to lend at low levels of interest rates,” the minutes reported after numerous business groups including the FSB, claimed that recent interest rate cuts were not working because banks are still too reluctant to lend money.

Action’s Needed, And It’s Needed Now!

Senior economic advisor to Ernst & Young Item Club said: “the vote on rates was in line with expectations but the most important aspect of today’s minutes was the unanimous vote to write to the Chancellor to seek his consent to implement quantitative easing.

“Items believes that it is crucial that the Bank be allowed to swiftly and boldly implement this policy.”

British Chambers of Commerce (BCC) has said that the MBC has to be bold.

According to economist David Kern: “there is a critical need for aggressively pursuing quantitative and credit easing. Businesses must be reassured that the MPC and the Bank will move in that direction.”

What Do You Think?

Is quantitative easing going to help the floundering economy?  Is it too late now to be of any good, or should it only be used as a last resort? Leave your comments here.