BoE extending QE to aid firms
THE Bank of England (BoE) plans to widen its quantitative easing programme to offer further help to sound firms that are unable to access working capital.
Firms will be able to offload their high-quality short-term debt backed by assets such as trade receivables, equipment leases and short-term credit to consumers for cash.
BoE officials said the new purchases of company debt would begin shortly, possibly by the end of June.
This should help improve “liquidity in credit markets that are not functioning normally”, the BoE said.
Bank officials said the market size of this move would be a few billion pounds and the purchases would be financed by creating money under the £125bn quantitative easing programme, designed to stimulate the economy.
Nearly £80bn of assets have been purchased under quantitative easing, but the vast majority – some £77bn – have been purchases of government bonds, with only £2.2bn of corporate bonds bought and £700m of standard corporate commercial paper so far.
Charlie Bean, the Bank’s deputy governor, said last month that one of the key reasons for the Bank’s dim outlook for the economy was the lack of working capital available to firms.