Yesterday, the BoE surprised markets by announcing the decision to expand its asset purchase programme. Ahead of the meeting, expectations were mixed, but most had expected the MPC to wait until the November meeting, when a new inflation report will be available. The Committee voted to increase the size of asset purchases by L75 billion to a total of L275B. They maintained the official bank rate paid on commercial bank reserves at 0.50%. According to the Monetary Policy Committee, tensions in the world economy threaten the UK recovery and the increased downside risks to output growth mean that the margin of slack in the economy is likely to be greater and more persistent than previously expected. While inflation is likely to rise above 5%, the deterioration in the outlook has made it more likely that inflation will undershoot the 2% target in the medium term. The eligible assets for purchase remain the same as in 2009. More information on the decision will be available in the Minutes, published on the 19th of October.