As expected, the Bank of England has fired the starting gun on a second round of quantitative easing [the creation of electronic money to purchase government bonds and other assets], boosting the current £200bn asset purchase scheme by £75bn.
Insofar as the government has a plan B, this is it. As George Osborne said in his speech to the Conservative conference, he and David Cameron are "fiscal conservatives and monetary activists", and the Chancellor came as close as possible to endorsing another round of QE while respecting the Bank of England's independence. But the move, which will inevitably fuel inflation, will appall those conservatives raised on Nigel Lawson's tight monetary policies.
Yet faced with the fact that the economy hasn't grown for nine months, it's no surprise that Osborne has approved another round of QE. A recent study by the Bank of England concluded that the last programme, which purchased assets equivalent to 14 per cent of GDP, boosted growth by as much as 2 per cent [the equivalent of a 1.5-3 per cent cut in interest rates].
Finally, it would be remiss not to note that in 2009, Osborne described QE as the "last resort of desperate governments when all other policies have failed."