By announcing a further £50 billion slug of QE, bringing the total to £175 billion, the MPC has signalled that it places more weight on weak GDP numbers and still-modest broad money expansion than recent stronger business surveys, which suggest an early return to economic growth.

The additional £50 billion of purchases will occur over three months, implying a monthly rate of £16-17 billion, down from about £25 billion in the first phase of QE between March and July.

The decisions to stop QE and restart it a month later have resulted in unnecessary market volatility. The MPC could, instead, have announced a slowdown in buying last month (as some commentators suggested at the time), confirming this reduced pace at today's meeting.

Banks' cash reserves at the Bank of England should rise further from their current level of £164 billion as a result of today's decision but by much less than £50 billion because of an offsetting decline in repo open market operations. Reserves are currently about three times the value of notes and coin circulating in the economy (£54 billion at the end of June), versus a pre-crisis ratio of less than a half.

With cash piling up at the Bank of England, banks have less need to boost their holdings of gilts and Treasury bills to ensure sufficient liquidity in the event of another market seizure. If banks lower their buying or even sell gilts to the Bank, this will offset the positive impact of QE on the broad money supply. (Banks' holdings of gilts and Treasury bills have fallen slightly since QE began, having risen strongly in late 2008 and early 2009 – see chart.)