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BoE confident lending scheme will help UK

BoE confident lending scheme will help UK

Bank of England Deputy Governor Paul Tucker said on Friday that he is confident that the central bank’s lending scheme to boost bank lending would help lower interest rates faced by businesses and households. He is pleasantly surprised” by the number of banks and building societies that had signed up to the BoE’s Funding for Lending Scheme (FLS) since it launched in early August.

The recent survey has indicated that the Bank of England will top up its asset-buying programme with another 50 billion pounds next month as UK recovery from recession has been seen quite lukewarm. The date suggests that the BoE will probably have to downgrade its growth forecast again for the UK – and continue to add to stimulus with more QE in November. It seems that Britain has fallen back into its second recession in four years at the turn of the year as tough government austerity measures and the euro zone debt crisis stifled the economy.

In the US, the number of Americans filing new claims for unemployment benefits fell sharply last week to the lowest level in four and a half years, suggesting the labour market is improving. Initial claims for unemployment benefit fell by 30,000 to a seasonally adjusted 339,000, the lowest since February 2008 according to the Labour Department.

On the FX markets, EUR/USD bounced back from the Spanish downgrade pushing back above the $1.29 level amid hopes the downgrade would force Spain to formally request a bailout. Sterling also registered gains against the USD hitting a high of $1.6054.

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