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Bank launches £75bn asset buy up scheme

The Bank of England has revealed it will begin to buy up bank assets in return for £75bn in newly printed Treasury bills.

For the first time in UK history the Bank will enact its new powers which will allow it to add money into the market as well as change the Base Rate.

At its March meeting, the Monetary Policy Committee agreed that the February Inflation Report had implied a substantial risk of undershooting the 2 per cent CPI inflation target in the medium term and that a further easing in monetary policy was likely to be needed. As a result, it decided to reduce Bank Rate by 0.5 percentage points, to 0.5 per cent and to inject £75bn into the market.

The MPC says this might take up to three months to carry out this programme of purchases. Part of the sum will finance the Bank of England’s programme of private sector asset purchases through the Asset Purchase Facility, but the Bank would also buy medium- and long-maturity conventional gilts in the secondary market. It is likely that the majority of the overall purchases by value over the next three months will be of gilts.

At its future meetings, the MPC says it will monitor the effectiveness of this purchase programme in boosting the supply of money and credit.

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