Aug 6 (Reuters) - The Bank of England extended its quantitative easing programme on Thursday, raising the size of its bond purchase scheme to an unexpectedly large 175 billion pounds ($297.3 billion) from 125 billion.
Here are some details about quantitative easing:
* WHAT IS QUANTITATIVE EASING?
-- Quantitative easing, notably employed by Japan from 2001 until 2006, refers to ways of boosting economic growth after traditional monetary policy tools, such as interest rate targets, have been exhausted.
-- Central banks flood the banking system with masses of money, more than is needed to keep official interest rates at zero or a low rate, to shore up financial systems and promote lending. They usually do this by buying up large quantities of assets from banks.
* MAJOR CENTRAL BANKS AND QUANTITATIVE EASING:
* U.S. FEDERAL RESERVE:
-- Economists agree the Fed's various programmes to boost the flow of credit through the expansion of its balance sheet to over $2 trillion can be regarded as a form of quantitative easing.
-- With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds.
-- The Fed said in June it would hold to a previous pledge to buy $1.45 trillion in mortgage-related securities and $300 billion in longer-term government debt.
-- The Fed is buying highly rated, U.S.-dollar denominated, three-month commercial paper through a special purpose vehicle to run until Oct. 30.
* EUROPEAN CENTRAL BANK:
-- In May the European Central Bank unveiled plans to buy up to 60 billion euros ($80 billion) of bank bonds backed by mortgage or public sector borrowing and doubled the length of time it lends out money for up to 12 months -- the first time the ECB had turned to the more unconventional monetary policy weapons at its disposal.
-- The ECB held its main interest rate at a record low of 1 percent, but President Jean-Claude Trichet left open the option of further easing.
* BANK OF JAPAN:
-- The Bank of Japan said in March it would increase purchases of government bonds by nearly a third this year, supporting government plans for more spending to cushion the recession.
-- The central bank raised the value of JGBs it would buy to a record 1.8 trillion yen ($18.3 billion) a month from 1.4 trillion yen, a measure seen as another step back towards the quantitative easing policy that the BOJ used to try to revive demand earlier this decade.
-- But despite the moves to buy assets, BOJ officials have said they are not ready to return to quantitative easing. Many BOJ officials believe no further policy action is needed unless Japan risks slipping into a deflationary spiral. The central bank believes the risk of this happening is small.
* BANK OF ENGLAND:
-- The BoE on Thursday raised the size of its bond purchase scheme to an unexpectedly large 175 billion pounds from 125 billion. The decision enables the central bank to continue its programme of asset purchases with newly created money -- which it started in March to boost Britain's recession-hit economy -- as the last of the 125 billion pounds was spent in late July.
* OTHER CENTRAL BANKS
* The Bank of Canada cut its benchmark interest rate to a record low 0.25 percent in April and made a conditional pledge to keep it there until mid 2010. The bank said in May Canada has less need than other countries to boost its economy with unusual steps like printing money to buy assets.
* Swiss National Bank board member Thomas Jordan indicated in early July that the SNB was ready to print and sell as many francs as needed as interventions were key to its "massive" quantitative easing.
* The Bank of Israel lowered short-term borrowing costs to a new low of 0.5 percent in March. With short-term rates so low, the central bank had also started buying government bonds in the secondary market to push yields lower.
(Writing by David Cutler and Jijo Jacob, Editorial Reference Units in London and Bangalore; editing by Stephen Nisbet)