Britain prints more money

The Bank of England said yesterday it would print an extra £50 billion to lift the recession-hit economy and Europe held rates at a record low as central banks wait for clearer signs that the crisis is easing.

Upbeat quarterly company earnings and improving economic data have driven the world's stock markets around 55 per cent up since they bottomed out in March. But the jury is still out on whether those figures point to a sustained recovery or a temporary stabilisation of the world economy. In Germany, manufacturing orders rose at their fastest pace in two years in June on strong foreign demand, a sign that the industrial sector in Europe's largest economy is recovering.

But in Britain, the BoE said the economy had suffered a deeper recession than expected, though there were signs the downturn was bottoming out and conditions in Britain's main export markets were improving.

The British central bank decided to leave interest rates at a record low of 0.5 per cent while the European Central Bank also kept its rates unchanged at one per cent as it waits to see the impact of efforts to revive the economy and credit flows.

The BoE's decision to expand its quantitative easing programme by far more than expected to 175 billion pounds enables it to continue its programme of bond purchases with newly created money for three more months.

"It is encouraging... but given the fragility of the economic recovery and doubts over the ultimate effect, I would not want to say this is the end of it," said Jonathan Loynes, Chief UK Economist, Capital Economics.