Bank of England pledges extra £25 billion

The Bank of England is to pump an extra £25 billion into the financial system to further stimulate the UK economy.

Members of the Bank's nine-strong Monetary Policy Committee (MPC) voted in favour of extending the policy of asset purchasing, taking the total size of the quantitative easing programme to £200 billion.

Although the MPC noted that the world economy is showing signs of recovery - particularly in emerging markets - the MPC said that activity remained "significantly depressed".

And while suggesting that "a pickup in economic activity may soon be evident", it highlighted that UK output has fallen by almost 6% since the start of 2008. It added that GDP fell again in Q3, as households continued to keep a tight rein on spending, and that business investment remains limited.

The £25 billion will be spent over a three-month period, which represents a slower rate than previously seen under the programme.

Meanwhile, the interest rate remains at 0.5% - remaining at the all-time low it reached in March this year.

The Bank's actions were welcomed by business group the Confederation of British Industry (CBI). Its chief economic advisor, Ian McCafferty, said that extending quantitative easing should mean "an extra degree of support for business and consumer confidence".

However, BBC economics editor Stephanie Flanders told BBC Radio Four's Today Programme that the money already invested by the bank as part of its quantitative easing policy has meant that bigger companies have found it easier to borrow, but it has not yet appeared as "cash in the street".

"There has definitely been an effect, but in terms of getting it through to the broader economy and making it easier for smaller companies to borrow - that's a lot less clear," she said.

"A lot of the money is just still sitting in bank accounts - it's not out there helping companies, giving them working capital."

IMAGE Lewis Whyld/PA Wire