Bank Of England Makes £50bn Cash Injection

The Bank of England has announced it will extend its quantitative easing (QE) programme by £50bn in a bid to stave off a double-dip recession.

The multi-billion pound emergency support for the UK economy takes the total asset purchases (also known as QE) from £275bn to £325bn.

The decision by the Monetary Policy Committee (MPC) for another cash injection had been widely anticipated following negative growth during the final quarter of 2011.

Two quarters of negative GDP would plunge the UK back into recession.

While other data had indicated that the UK's financial health was starting to improve, the MPC chose to take fresh action at its February meeting, despite the risk it poses to the rate of inflation.

The BoE policymakers have also announced they would keep the base interest rate at its record low of 0.5%.

Both moves were predicted by the Sky News money panel.

Speaking ahead of the announcement, RBS UK economist Ross Walker said: "The BoE's policy reaction function continues to betray a downside/activist bias: if in doubt, loosen policy.

"In the event that any further easing proved to have been the wrong move, the Bank could easily rectify this."

James Daley, editor of Which? Money, said the base interest rate was unlikely to be moved until 2013 at the earliest.

The additional QE was welcomed by business leaders.

David Kern, chief economist at the British Chambers of Commerce, said: "Although the benefits are not immediately obvious to the business community, quantitative easing plays a key role in strengthening the financial system and stabilising the wider economy.

In the face of difficult domestic circumstances and the on-going crisis in the eurozone, the decision was a sensible one."

But he added that other measures were still needed to boost growth and increase the flow of credit to businesses.

"This means implementing an aggressive deregulatory programme alongside a package of credit-easing measures or an SME bank," Mr Kern said.

However, the announcement came as a blow to pensioners.

QE can fuel inflation, which means more gloom for savers who have already seen the value of their pension pots eroded by the high cost of living and low interest rates.

Groups representing retirees warned that further money-printing could leave more than a million pensioners "permanently poorer for the rest of their lives".

Even with more QE, the jury was out among Sky's money panellists as to whether or not the UK would go back into recession.

Mr Daley said: "Although it's quite possible that Britain will slip back into recession, it seems unlikely that this second dip will be as deep or protracted as the first.

"The game changer, however, is the euro. If the eurozone cannot come up with a solution to the debt crisis, the impact on the UK will be significant."

Anthony Thomson, chair of Metro Bank and Louise George, founder of Peter Popple's Popcorn were more positive.

"I think the recovery is fragile, but it will be a recovery nonetheless. I think we will see real growth, albeit small, this year," Mr Thomson said.

Ms George added: "At this stage it seems there will be very limited growth but not a double dip recession and growth is likely to be stronger than the other European countries."

Mr Walker summed up: "None of this should suggest the UK is about to have a stellar year. It isn't. Growth will be weak - we forecast expansion of just 0.8% - but that is meaningfully better than recession."

The panel members also gave their views on wider economic policy following the recent political furore over executive pay and bonuses.

Sir Martin Sorrell, CEO of communications services group WPP, said: "We just have to face the fact that bashing bankers, bonuses and business works currently at the ballot box."

He urged businesses to "communicate to command their share of the voice", stressing that growth means jobs, Government revenue and help in areas of technology, education and infrastructure.

But Ms George added: "There has been a lot of scrutiny on banks and bonuses recently but the Government is in the process of implementing good policies in order to help strengthen the economy, in a better way than their European counterparts."

Meanwhile, the European Central Bank has voted to hold its key interest rate at a record low of 1%.

The bank has now left rates alone for two monthly meetings in a row while it waits to see whether the eurozone economy needs more help. Many economists predict at least a mild recession.