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Wondering what on earth Nils was on about? He's written this for you:

Eddie Mair | 17:07 UK time, Thursday, 18 December 2008

"Quantitative easing is what central banks do when they have run out of run out of road in cutting interest rates to try to stimulate the economy.

The aim is to increase the amount of money circulating in the economy.

So the central bank buys assets from the private sector - usually Treasury or corporate bonds - in order to pump more money into the economy.

If you artificially increase the amount of money circulating in the economy the danger is that you create inflation because you have more money chasing the same amount of goods and services.

So this kind of quantitative easing is only used if the central bank is trying to create a bit of inflation to offset the danger of deflation - in which prices keep falling.

But it's a risky technique. If it's overdone it could stoke up a huge inflationary problem for the future. And central banks have little experience of how to use the technique.

The US Federal Reserve is reckoned to have started quantative easing some time ago - having roughly doubled the size of its balance sheet in the last year.

The Bank of England is thinking about it as a theoretically possibility but points out that it has Bank rate at 2%, so it still has further scope for conventional interest rate cuts if necessary.

It is sometimes referred to as "printing money" but that is more a figure of speech. Neither the Fed nor the Bank of England is about to start printing a lot of extra bank notes. "


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