QE3- late but worth a mention

Sorry that this post is a bit late- been quite busy lately!
Well the Bank of England announced last week that it was to inject £50bn into the economy in its third round of Quantitative Easing. Surprisingly, I haven't seen that much coverage of the plan around the internet (most likely because the effects of this plan are already known), but Stephanie Flanders' analysis is both interesting and accessible:

"The Bank's monetary policy committee (MPC) voted to spend another £75bn on government bonds last October, and another £50bn in February - to make a grand total of £325bn since March 2009. The additional £50bn announced today will take it up to £375bn, though it's worth noting that the new money will be spent at a slower rate than before - over four months instead of three.
Some will see that slower pace as a hint that members of the MPC think this bout of easing will be less powerful than in the past - or perhaps that they are worried about possible negative effects of continuing the policy for so long. But the Kremlinology is less important than the fact that they have done it at all.
On the face of it, the Bank has not got a lot in return for the £125bn it has spent since the autumn, other than a pile of government IOUs.
The narrowest measure of the money supply - in effect, cash on bank balance sheets - has risen by 58% since September, as you'd expect when the Bank is handing their customers all that freshly created money in exchange for the purchased gilts. But there is not much sign of that getting out into the broader economy. Lending to households and companies has risen by just 0.2% in that time. (Thanks to Vicky Redwood, chief UK economist for Capital Economics, for pulling these numbers together for me. For those that care about these things, we're using the M4 measure of lending - excluding transactions between different parts of the financial system which otherwise distort the figures.)
Other things have also been moving in the wrong direction, from the Bank's standpoint. The pound has risen about 6%, on a trade weighted basis, since October, and the FTSE is only slightly higher.
Finally, borrowing costs for companies and households, if anything, have crept up. The Bank's own figures showed the average new mortgage rate creeping up to 3.75% in May, higher than in April and more than a third of a percentage point higher than at the start of the year.
Of course, you can blame the eurozone crisis for a lot of these unhelpful developments - maybe all of them. Without that extra liquidity sloshing around the financial system, Bank officials would say things would have been considerably worse.
As ever, the argument would be that the Bank cannot hope to control what is happening across the Channel, or prevent it from darkening the prospects for the UK. But it can do all it can to offset the upward pressure on bank funding costs and the downward effects on confidence. They would also point out that if their forecast shows inflation dipping below target in two or three years, the Bank can hardly sit on its hands.
All of that is true. But it is a striking reflection of our times that the MPC is continuing with more QE, three weeks after the Bank's governor and deputy governor admitted, in separate speeches, that asset purchases, on their own, were not enough.
Sir Mervyn King could scarcely be gloomier about the short-term outlook for the eurozone - and the UK. He repeated again recently that we were "only halfway through" the crisis - and warned that the economic situation had deteriorated dramatically in a matter of just a few weeks.
Yet, somehow, he and his fellow policy-makers at the Bank must convince the country, and the City, that more quantitative easing will meaningfully offset this gloom, and that further steps - like easing the liquidity requirements for banks, and the "funding for lending" scheme - will finally encourage banks to lend, and firms and households to borrow and spend. That's despite the fact that British banks are already holding idle liquidity worth around £500bn - about 30% more than regulators have formally required them to hold.
There might not be many other avenues open to our central bank in the current climate, but making that case is going to be a challenge, to say the least" 

It strikes me, someone who is not a professional economist and has very limited economic knowledge, that although the Bank's policies can have some tangible impact, the real need for these policies is all to do with confidence. The effect of QE is to increase confidence of households and firms in banks. However, with a gloomy economic outlook, it seems as if the Bank need to do something radical if they want to have a real impact. 
http://www.bbc.co.uk/news/business-18725082