Analysts at Barclays Capital said King evidently has become more gloomy about the economy in recent weeks. "Heightened uncertainty about the euro area is increasingly infecting the U.K. outlook through tighter credit conditions and low confidence among businesses and households," they said, adding that they saw a greater likelihood that the Bank would soon expand its 325 billion pounds stimulus program of asset purchases, known as quantitative easing.
Ostwald said the announcement of new measures "confirms that the U.K. banking sector remains in an extremely poor state."
"It may only be weak credits in the business world that will be knocking down the doors of the banks" to take advantage of the new programs, he added.
Vicky Redwood, chief U.K. economist at Capital Economics, said it was "reassuring that, after criticism that they were slow off the mark in the initial stages of the financial crisis, policymakers are trying harder to get on the front foot this time."
However, she added, "Given the risky environment, banks may simply not want to lend more, even with the carrot of cheaper funding. Indeed, the Government might end up having to take the next step and guarantee bank lending itself, at least in part, therefore taking some of the risk off banks' balance sheets altogether.
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