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Business NEWS

Bank of England Maintains Bank Rate at 0.5% and continues with £125 Billion Asset Purchase Programme

By Amarendra BhushancloseAuthor: Amarendra Bhushan Name: Amarendra Bhushan
Email: abdhiraj@gmail.com
Site: http://ceoworld.biz/ceo/
About: See Authors Posts (2031) for CEOWORLD Magazine Updated:July 9, 2009

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The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases totalling £125 billion financed by the issuance of central bank reserves.

The Committee expects that the announced programme will take another month to complete. The Committee will review the scale of the programme again at its August meeting, alongside its latest inflation projections.

The minutes of the meeting will be published at 9.30am on Wednesday 22 July.

The previous change in Bank Rate was a reduction of 0.5 percentage points to 0.5% on 5 March 2009. A £75 billion programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009. The programme was increased to a total of £125 billion on 7 May 2009.

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Tagged with: bank of england, Bank Rate, Monetary Policy Committee

• Business_Girl
  I'm a prospective business student and have only just come accross this article. What interests me is what is meant by 'programme of asset purchases', particularly in this case of the Bank Of England? And why have they decided to do that?
  Please help to clarify that for me.
  
  Thank you
• CEOWORLD Magazine
  Hi Business girl,
  
  In January 2009, the Chancellor of the Exchequer authorised the Bank to set up an Asset Purchase Facility (APF) to buy high-quality assets financed by the issuance of Treasury Bills.
  
  The aim of the Facility was to improve liquidity in credit markets.
  
  When the APF is used for monetary policy purposes, purchases of assets are financed by the Bank creating money, rather than by issuance of Treasury Bills.
  
  Purchases of assets will be undertaken by a subsidiary of the Bank - the Bank of England Asset Purchase Facility Fund.
  
  For example, if a pension fund or life assurance company sells an asset to the Bank this boosts the amount of money in the economy.
  
  The seller of an asset to the Bank can spend the new money it receives on goods and services which directly adds to overall spending or it can purchase other assets which will tend to boost asset prices more broadly and provide an indirect spur to spending.

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