The Bank of England yesterday opened a new chapter in its monetary policy handbook by creating £75bn of new money to pump into the economy over the next three months.

The Bank conceded that it had run out of ammunition on interest rates, after cutting them as close to zero as possible, and needed to take additional unorthodox measures to prevent a slide into deflation.

The deep recession has led the bank to embrace this policy of quantitative easing – the purchase of assets, mostly gilts, with money created at the stroke of a central bank computer key. Gilts prices jumped on the news that the Bank planned to purchase nearly a third of the outstanding 5- to 25-year government bonds.

Financial Times