It also held interest rates at 0.5 per cent, a rate that has now been held for the last three years.

Bank of England governor Mervyn King said: “In light of its most recent economic projections, the Committee judged that weak near-term growth outlook and associated downward pressure from economic slack meant, without further monetary stimulus, it was more likely than not inflation would undershoot the two per cent target in the medium term.”

It forecast inflation will decline further as the effect of energy and import prices diminishes but that there would be a recovery of household real incomes and a strengthening of output growth.

Inflation currently stands at 4.2 per cent and the next inflation announcement will be made on 14 February.

The Bank expects this round of quantitative easing will take three months to complete.

Ian McCafferty, chief economic adviser for the Confederation of British Industry, said: "Even though there are tentative signs that the economy is stabilising, the outlook is highly uncertain. This new round of quantitative easing should help support confidence, though the direct stimulus to near-term growth is likely to be limited."

More details on the Monetary Policy Committee’s decision will be published in the MPC minutes on 22 February.

The next decision on interest rates and quantitative easing will be made on 8 March.