An extra £50bn of stimulus will be injected into the UK's ailing economy, in another desperate attempt by the Bank of England's monetary policy committee to pull the country away from recession and towards a recovery.
With the eurozone crisis weighing heavily and recent economic data suggesting the recession will continue across another quarter, the Bank said it needed to act.
"In spite of the progress made at the latest European Council, concerns remain about the indebtedness and competitiveness of several euro-area economies, and that is weighing on confidence here," said a statement from the committee.
"The correspondingly weaker outlook for UK output growth means that the margin of economic slack is likely to be greater and more persistent."
This additional stimulus, made viable by rapidly falling inflation, takes the Bank's quantitative easing programme to a vast £375bn total, meeting analysts' forecasts.
"This extension of QE should provide a fillip to confidence, but with gilt yields already at low levels, the direct impact may only be modest, and consideration should also be given to investing in a broader set of assets, for example bank bonds and high-grade corporate paper," Dr Neil Bentley, Confederation of British Industry (CBI) deputy director-general, said.
"However, when combined with the measures announced at the Mansion House, this additional QE will provide some support to business at a difficult time."
The pound has so far held up against the dollar and the euro.
"As ever, the market gets excited about central bank action and quantitative easing would in any other circumstance see the pound sold off," Edward Knox, currency analyst for Caxton FX, said.
"However the UK's AAA status and the hands-off approach that the Bank of England has adopted to currency levels will keep the pound well supported for now."
ECTR and Funding for Lending
The extra £50bn comes on top of two new credit easing schemes from the Bank and will raise questions as to how bad rate-setters think the UK's economic prospects are.
Committee members also voted to hold the base interest rate at its record low of 0.5 percent for the fortieth consecutive month, despite calls from the International Monetary Fund (IMF) to drag them down further.
Under the asset purchase facility, the Bank of England has already bought up around £325bn worth of gilts in order to improve liquidity in the markets. The next round of asset purchases should take around four months to complete and the target value is being kept under review.
This new liquidity, it was hoped, would free up cash on businesses balance sheets and enable them to start investing in jobs and growth.
Some question the need for an extra £50bn of quantitative easing in light of the two new Treasury-back credit easing schemes by the Bank.
Called the Extended Collateral Term Repo (ECTR) and "Funding for Lending", both schemes offer cheaper than the market rate loans to banks in order to free up credit for consumers and businesses.
Mervyn King, the Bank's governor, said that the schemes will offer banks a "significant financial incentive" to increase lending at more affordable rates into the wider economy.
"On that basis he - and anyone else on the Committee who agrees with him - should expect that the scheme may deliver a powerful stimulus to demand for over the relevant time horizon for monetary policy, and that reduces the need for further asset purchases," Sanjay Mathur, an analyst at RBS, wrote in a research note.
Banks' access to the cheap loans will be directly linked to how much they lend.
However King has also warned that there are "no guarantees" the new schemes will work.
The Bank of England's financial policy committee published a report urging banks to dip into their vast capital buffers - pots of hoarded cash to shore themselves up in case of another crisis - in order to increase lending should the economy and its outlook worsen
"The outlook for financial stability has deteriorated, particularly in light of heightened uncertainty about how, and when, euro area risks will be resolved," said the report.
PMI data suggests ongoing UK recession
Dismal private industry data from the service, manufacturing, and construction sector suggest the recession will likely extend into the second quarter of 2012.
Service sector output growth slowed to an eight-month low in June, according to the purchasing managers index (PMI) survey compiled by Markit, a blow to chances of a swift UK recovery as it represents around three quarters of the economy.
Manufacturing sector output was still in contraction, while the construction sector saw its sharpest drop in output in two-and-a-half years, collapsing from growth in May to contraction in June.
"Looked at alongside the other PMI surveys, which showed an ongoing downturn in manufacturing and a sharp deterioration in the construction sector in June, the services PMI probably cements the case for further stimulus from the Bank of England, with the three surveys now collectively down firmly into territory that has triggered action from the monetary policy committee in the past," Chris Williamson, chief economist at Markit, said.
It was a severe slump in the construction sector that plunged Britain back into its second recession in four years.
Official figures on UK GDP were recently revised down to a deeper-than-feared recession.
In the last quarter of 2011, the British economy contracted by 0.4 percent. Previous estimates had been 0.3 percent.
A further 0.3 percent contraction came in the first quarter of 2012.
Eurozone and emerging markets struggle
With no resounding resolution to the eurozone sovereign debt crisis apparently in sight, despite positive rumblings from the recent European Council summit about plans for a new central banking authority that loans directly to struggling banks, fears of a sudden catastrophe in the single currency area are dampening business and consumer confidence in the UK.
The eurozone is Britain's biggest trading partner.
Furthermore there is slowing growth in some of the world's emerging markets, key trading allies of the UK, such as India and China.
This slowdown threatens the UK's export market, which Chancellor George Osborne has said he wants to increase to £1tn in value across a decade, and is eyed as a potential saviour of the country's economy.
"UK output has barely grown for a year and a half and is estimated to have fallen in both of the past two quarters," said the monetary policy committee's statement.
"The pace of expansion in most of the United Kingdom's main export markets also appears to have slowed. Business indicators point to a continuation of that weakness in the near term, both at home and abroad."