Bank of England says too early to tell impact of asset buying

It is still too soon to tell what impact the Bank of England's £125 billion asset-buying spree is having on the economy, the central bank said in its quarterly bulletin.

The BoE said its unprecedented quantitative easing programme should boost the economy through a number of channels - spending by households and companies and an expansion of bank lending.

"The responses of those who receive the additional money balances will be key to its overall effectiveness," the BoE said.

"There is considerable uncertainty about the strength and timing of the effects. Standard economic models are of limited use in these unusual circumstances, and the empirical evidence is extremely limited."

The central bank has slashed interest rates to a record low of 0.5 per cent as well as embarking on its asset buying programme in an effort to kickstart Britain's economy which shrank at its fastest pace in 30 years in the first quarter.

There have been concerns that using billions of pounds of newly-created cash for monetary policy could cause a future spike in inflation, but the BoE has been keen to reassure markets it will reverse the process when necessary.

"The monetary policy framework will ensure that the appropriate measures are taken over time so that the inflation target is met in the medium term," the BoE said.