By Daniel Hunter
The Bank of England's Monetary Policy Committee have, as was widely expected, injected £50 billion into the economy with a second bout of quantitive easing (QE).
The only surprise is that the amount was only £50 billion, with many analysts expecting the figure to have been £75 billion.
The MPC also confirmed that the interest rate would remain at the record low of 0.5%.
"Inflation is set to decline pretty aggressively this year and the risks of shockwaves from the eurozone remain elevated so more QE was a no-brainer, it was just a case of how much," Richard Driver, Currency Analyst for Caxton FX.
"Bets on a £75bn QE move had built over January in response to last quarter’s contraction but the recent PMI figures seemed likely to have swayed the BoE in favour of £50bn.
"The Bank of England’s call on QE really comes down to the scale of the eurozone threat that it perceives and our pessimistic view of the balance of risks points to the need for a more drastic QE move.
"It will be interesting to see how the MPC voted; you can be confident that Adam Posen would have been pushing for £75bn but the number of those who joined him will be important moving forward.
"The £50bn move was in line with market expectations and shouldn’t weigh on sterling at all really, it was fully priced in."
Ian McCafferty, CBI Chief Economic Adviser, said the move was not a surprise, but welcome nonetheless.
“The Bank has been signalling that a further extension of the asset purchase programme was likely this month," he said.
“Even though there are tentative signs that the economy is stabilising, the outlook is still highly uncertain. This new round of QE should help support confidence, though the direct stimulus to near-term growth is likely to be limited.”
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