The Bank of England announced today that they plan on swapping GBP50 billion worth of UK bonds for mortgage securities in an effort to add liquidity to the lending market.
For a long time, the [B]Bank of England[/B] has refused to follow in the Fed’s footsteps because they did not want to foster an environment where banks and financial institutions would start relying on central bank bailouts. Their laissez-faire attitude received significant criticism, causing the central Bank of England to finally buckle under the weight on political and economic pressure. Taking a page out of the Fed’s book, they have swapped their safe and secure UK gilts for slightly riskier mortgage backed securities. The market has not taken this move positively as the British pound is down over 200 pips from its high.