Chancellor George Osborne's Mansion House speech
The Bank of England will launch two new stimulus packages in response to the worsening economic outlook, the BBC understands.
Together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies.
It will also offer banks access to short-term money to deal with "exceptional market stresses".
Chancellor George Osborne is to say the measures will "inject confidence" into the financial system.
They would also "support the flow of credit to where it is needed in the real economy", Mr Osborne will say in his annual Mansion House speech.
"We are not powerless in the face of the eurozone debt storm. Together we can deploy new firepower to defend our economy from the crisis on our doorstep."
The Bank has already pumped �325bn into the economy through its quantitative easing (QE) programmes, under which it buys up government bonds. The idea is that the institutions that sell bonds to the Bank then use the money to buy up other assets.
However, there have been criticisms that they have held on to the money, rather than spending it, undermining the effectiveness of QE.
Cheap loansRather than further QE to stimulate the economy, the Bank will now offer cheap loans to banks on the basis that they increase lending.
The BBC's business editor Robert Peston said the scheme would be seen as successful if it increased bank lending by �80bn, or 5%.
He said the second measure the Bank would be introducing was a scheme outlined in December last year - called the Extended Collateral Term Repo Facility - to address a shortage of liquidity in the banking sector.
This will make it easier and cheaper for banks to borrow at least �5bn every month to cover any shortfalls in cash.
Spain is the latest country to be dragged into the debt crisis, with Madrid agreeing a 100bn-euro ($126bn; �81bn) bailout of its banks by fellow eurozone countries.
Spain's borrowing costs on the secondary market - an indication of investor confidence in its ability to repay its debts - also hit 7% on Thursday, a level widely seen as unsustainable. Italy's borrowing costs also rose sharply.
With Greek elections taking place this weekend in what is being seen as a referendum on the euro, analysts have warned of potential further shocks to the financial sector.
Source: http://www.bbc.co.uk/news/business-18448636#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
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