The Bank of England has unleashed £75 billion of emergency support after admitting "tensions in the world economy" threatened the UK's recovery.
The Monetary Policy Committee (MPC) voted to boost the Bank's Quantitative Easing (QE) programme - effectively printing more cash - from £200 billion to £275 billion and hold interest rates at 0.5%.
The move, dubbed QE2, is the first change to QE since November 2009 and is the clearest signal yet that the Bank thinks Britain is on the brink of a double-dip recession.
Business leaders welcomed the announcement after figures revealed Britain suffered a deeper recession and is recovering more slowly than first thought.
However, the decision raised fears of a surge in the already-high rate of inflation, which would erode savings and pension funds.
Elsewhere, the European Central Bank offered new emergency loans to banks to help steady a eurozone financial system shaken by the region's deepening debt crisis.
Alan Clarke, UK Economist at Scotia Capital, said: "Once again the BoE has made use of its secret weapon - shock and awe. Pretty much everyone expected QE to restart at some point - but it was only a minority view that it would start this soon, or in excess of £50 billion."
A report by the Bank into the effect of QE on the economy previously found the stimulus measure provided a "significant" benefit to growth and helped GDP increase by around 1.5% and 2%. This was equivalent to dropping interest rates by between 1.5% and 3%.
The MPC said its members made the decision to boost QE over the next four months because the slack in the UK economy will likely be "greater and more persistent than previously expected".
The Bank said the pace of growth in the UK's main export markets had slowed while the eurozone debt crisis and its impact on financial markets were dragging on Britain's recovery.