The Bank of England's drive to inject billions into the economy to jump-start growth moved swiftly into top gear yesterday as banks scrambled for its newly created money.

As the Bank launched its strategy of “quantitative easing” — effectively, printing money — banks clamoured to sell it government bonds, or gilts. The Bank was deluged with offers from banks willing to sell it £10.5 billion worth of gilts in return for its cash — some five times more than the £2 billion of funds made available in yesterday's first “QE” operations.

Economists said that the early success for the Bank's first auction to buy gilts signalled that it should have few problems implementing its plan to boost the amount of cash and credit flowing through the economy by £75 billion over the next three months by buying gilts and corporate debt.

But uncertainty persisted over just how effective the scheme will prove, as the Bank secured no bids in the first, non-competitive, phase of its auction. This involved inviting investors, other than mainstream banks, such as pension funds, to sell gilts, at a price to be set in the later competitive part of the auction, to banking groups.

Economists put the failure down to teething problems such as the speed at which the paperwork for bids had to be completed. But if these issues persist it could impede the QE plan.

There are worries that if cash-strapped banks take the lion's share of the new cash, they may hoard it, rather than lend it, undermining any boost to the economy.

So, the Bank hopes to bypass banks by buying assets from other investors, infusing the money into the economy more directly. This part of the plan could be scuppered if non-bank institutions fail to take part.

Another worry is that as more gilts are sold, the Bank could end up having to pay over the odds. Analysts said that yesterday's purchases were made at fair values.

The Bank will be pleased with the early results of QE, which has achieved a key aim of driving down market interest rates as ten-year gilt yields, a key factor in determining interest rates for consumers and companies, have fallen to record lows below 3.07 per cent. Yesterday, ten-year yields briefly dipped below those of German government bonds for the first time since 2002.

In another sign of success, the US Federal Reserve is thought to have been so impressed by the early results for QE that is considering similar moves.

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