The Bank of England expanded quantitative easing and added an additional 50 billion pounds to its asset purchase program as expected.
This expands the size of the program from 275 billion pounds to 325 billion, allowing the central bank to be able to purchase more British government bonds.
The bank’s Monetary Policy Committee announced the decision today after a policy meeting, also announcing its decision to maintain the benchmark interest at 0.5 percent. This is a record low rate and has remained so since March 2009, when the bank first introduced its quantitative easing strategy.
GBPUSD jumped after the announcement from 1.5819 to 1.5870.
The BoE quantitative easing program began in October last year and surprised markets. That program lasted four month and the current expansion is expected to last for three months.
Economic recovery in the UK has been quite sluggish and was reflected in a contraction in GDP in the fourth quarter of 2011. This stoked fears of a renewed recession in Britain though recent new data at the start of this year indicate that there is a surprisingly strong start to the year. Manufacturing and service PMI data were strong and industrial production rebounded in December from the slump in the previous months.