Tuesday, July 21, 2009
Putting more money into our economy to boost spending
The MPCâ€™s decision to inject money directly into the economy does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions â€“ that could be insurance companies, pension funds, banks or non-financial firms â€“ and credits the sellerâ€™s bank account. So the seller has more money in their bank account, while their bank holds a corresponding claim against the Bank of England (known as reserves). The end result is more money out in the wider economy.