October 6, 2011 / 11:16 AM / in 8 years

Osborne backs QE, considers more options

Chancellor George Osborne delivers his keynote speech on the second day of the Conservative Party Conference in Manchester October 3, 2011. REUTERS/Phil Noble

LONDON (Reuters) - Britain will explore other policy options to get credit flowing to small businesses and complement the Bank of England’s expanded quantitative easing programme, Chancellor George Osborne said on Thursday.

In a letter to Bank Governor Mervyn King, Osborne gave the go-ahead to the central bank to inject a further 75 billion pounds into the economy via the purchase of UK government bonds and other private sector assets.

“Given evidence of continued impairment in the flow of credit to some parts of the real economy, notably small and medium-sized businesses, the Treasury is exploring further policy options. Such interventions should complement the MPC’s asset purchases,” Osborne said.

King wrote to Osborne requesting permission to undertake the extra purchases, saying the global economy had slowed and that the euro zone debt crisis had created severe strains on financial markets.

“In order to keep inflation on track to meet the target over the medium term, the committee judged that it was necessary to inject further monetary stimulus into the economy.”

The asset purchases will be conducted over the next four months by the Asset Purchase Facility — a separate vehicle controlled by the Bank which holds the securities, and which is indemnified by the government.

Reporting by Fiona Shaikh

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