The Bank of England will pump another £150billion of emergency funds into the economy after firing up its printing presses again.
Just hours before Chancellor Rishi Sunak announced that he was extending the furlough to next March, the Bank ramped up its quantitative easing (QE) programme to boost spending and prop up the crumbling economy.
The support from the Bank and the Treasury came as new coronavirus restrictions were imposed in England, shutting swathes of businesses and returning an estimated 5.5m workers to furlough.
Desperate measures: Bank of England governor Andrew Bailey promised to do ‘whatever it takes’ to keep the economy afloat
The Bank said the recovery from the crisis will be longer than previously feared, with the economy shrinking again at the end of this year and more than 1m workers losing their jobs.
Governor Andrew Bailey said: ‘We are here to do everything we can to support the people of this country.’
The £150billion, where the Bank pumps money into the economy by buying government bonds with newly created cash, was more than the £100billion expected in the City.
It brings the total created through QE since 2009 to £895billion, with £450billion unveiled this year.
But experts fear the Bank is closing on the limit of what is possible through QE, leaving it short of tools to tackle the crisis. Interest rates are at a historic low of 0.1 per cent and could fall into negative territory, meaning customers would pay to keep money in a bank.
Bailey said: ‘Decisions used to be based around one tool – interest rates – and there is now a greater degree of decision-making because you’re not just choosing the calibration of the tool, you’re choosing which tool to use.’
Berenberg bank economist Kallum Pickering said fears the Bank was running out of room for more QE were ‘overdone’.
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