On Thursday, the Bank of England will announce its next round of quantitative easing. This indicates that the crisis is escalating in Europe.
It will therefore escalate here. It’s the same crisis.
“The Bank’s Monetary Policy Committee is set to announce on Thursday that it is expanding its Quantitative Easing programme from £275bn to £325bn.” Multiply this by 1.6 for the dollar amount.
There is desperate optimism here.
George Buckley, a UK economist at Deutsche Bank, the investment bank, said: “If sentiment and activity hold up this could even be the last round of QE, although the fragile nature of the recovery and the situation in Europe could mean the programme continues after May.”
Why is the central bank doing this? To goose the economy.
By buying up bonds owned by banks, the policy aims to give those institutions more money to lend to consumers and businesses, with the effect of boosting helping the recovery. Experts are divided over the policy’s success.
What has forced the central bank’s hand? The sagging economy.
The Government has been battered by grim economic news on several fronts in recent weeks. The total size of Britain’s public sector debt passed the £1trillion for the first time and unemployment has continued to rise, reaching levels not seen for 17 years.
The City is the banking district in London. “Most City forecasters believe the economy is currently in the second phase of a double-dip recession after the Office for National Statistics said the economy shrank by 0.2% in the final three months of last year.
This is spreading across Western Europe. It will force Bernanke’s hand at some point, probably this year.