The Bank of England has extended its quantitative easing (QE) programme to a total of £325bn to boost the UK economy.
In order to boost the UK economy, the Bank has decided to increase the QE programme by £50bn whilst the Bank’s Monetary Policy Committee (MPC) assures that interest rates will remain at their record low of 0.5%. The figure was brought down from £75bn of QE after economic surveys revealed that manufacturing and service sectors performed above expectation in January.
In a statement, the Bank said: “concerns remain about the indebtedness and competitiveness of some euro-area countries” despite figures showing that UK industrial production grew by 0.5% between November and December despite a forecast of 0.2%, and import prices fell by 1.3%.
Howard Archer, chief UK economist at IHS Global Insight, said: “Despite overall signs that activity picked up in January after GDP contracted 0.2% in the fourth quarter of 2011, the economy is far from out of the economic woods and it continues to face major obstacles to developing sustainable, decent growth.”
Joanne Segars, the chief executive of the National Association of Pension Funds, highlights the damaging impact this will have the value of pensions and calls for help for pension funds from the Pensions Regulator.
Segars says: “For the companies that run final salary pensions, QE is a headache which pushes their pension funds further into the red. This means businesses have to put more money into their pension schemes, instead of spending it on jobs and investment. Our fear is that firms struggling with a weak economy will simply choose to close their pension schemes.”