Bank of England backs another stimulus

AP

(AP) LONDON - The Bank of England on Thursday backed another 50 billion pounds ($78 billion) injection into the ailing British economy.

The move by the Bank of England's Monetary Policy Committee was widely anticipated and raises the amount it is pumping into the British economy since March 2009 to 375 billion pounds. It is the first stimulus since February.

Under the so-called quantitative easing program, the Bank purchases British government bonds, known as gilts, from banks, in the hope that they will use the money to lend to businesses and consumers.

The new purchases are expected to take 4 months to complete.

Britain is officially in recession, defined as two consecutive quarters of negative growth.

Concerns that the bank's monetary largesse has stoked inflation have eased recently, with consumer price inflation falling to 2.8 percent last month. As recently as last September, inflation was as high as 5.2 percent, more than double the Bank's official 2 percent target.

In a statement, the Bank said that without more stimulus it was increasingly likely that inflation would fall below the official 2 percent target in the medium term because of tight credit conditions, the government's deficit-reduction program as well as the debt crisis in the 17-country eurozone. Though Britain is not part of Europe's single currency, the eurozone is the country's main trading partner.

[karek40]

How about the projected effect of the stimulus on the comparative rates between the pound and the dollar?