The Bank of England expanded its bond purchase program depends on its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated.

Bond yields plunged after the Monetary Policy Committee, led by Governor Mervyn King, kept the key interest rate at 0.5 /cent and increased its purchase program by 50 billion pounds ($84 billion) to 175 billion pounds. The European Central Bank left its rate at 1 /cent and President Jean-Claude Trichet said officials are “satisfied” on the ECB’s own purchase plan.

The Bank of England’s move suggests policy makers, who based the decision on quarterly forecasts prepared in August, assessed that their stimulus plan and record low interest rates weren’t enough to quell the threat of deflation. While services grew at the fastest pace in 1 1/2 years in July, unemployment is increasing  and banks have kept restricting access to credit.

Bond yields dropped and the pound fell after the Bank of England’s statement. The yield on the benchmark 10 year gilt fell 11 basis points to 3.71 percent and the pound declined as much as 1 percent and traded at $1.6816 as of 3:54 p.m. today in London.

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