Bank freezes quantitative easing

Bank of England

The Bank of England has made the decision that there will be no more quantitative easing (QE) to stimulate the growth in the UK.

Under QE, the Bank has pumped new money into the economy by buying assets such as government bonds as a way to boost lending by commercial banks.

Last week it revealed it had spent all of the GBP£200 billion put aside for QE.

For the eleventh consecutive month, the Bank also kept interest rates on hold at a record low 0.5 percent.

While halting QE, the Bank said the GBP£200 billion already injected into the economy through the programme would "continue to impart a substantial monetary stimulus to the economy for some time to come."

The Bank hasn't closed the door on further spending though.

The Bank started QE in the depths of the recession last March in an effort to ward off the threat of deflation and to try and strengthen the economy.

"[The Bank] will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them."

"Inflation is considerably stronger than the Bank had expected and there are concerns that it won't get back within target [if QE continued]," Jason Simpson from Royal Bank of Scotland told the BBC.

January figures

Official figures in January showed that UK consumer prices rose in December by 2.9 percent, which was the fastest annual pace for nine months and above the Bank's two percent target.

Bank Governor Mervyn King warned last month inflation was "likely to rise to over three percent for a while", and could go even higher if energy prices and indirect taxes were to increase further, but added that it "should return to target in the medium term."

Although the UK did officially come out of recession in the fourth quarter of 2009 - ending six consecutive quarters of economic decline - the growth was just 0.1 percent, which was much less than expected.

Most analysts expect rates to stay at 0.5 percent until at least the second half of 2010 for fear of the UK falling back into recession.

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