LONDON (Reuters) - The Bank of England said yesterday it will start its £50 billion ($70 billion) shopping spree to get credit markets moving again with purchases of corporate bonds, commercial paper and debt issued by banks that were recapitalised by the government.

But policymakers are holding off for now from using the asset-buying facility to give the economy a boost by increasing the money supply, saying only that they would keep that option under review.

Finance minister Alistair Darling sanctioned the asset-buying scheme last week in order to get lending flowing as Britain is now in its first recession since the early 1990s because companies and consumers are being starved of credit.

In a letter to Darling yesterday BoE Governor Mervyn King said precise details on how the central bank would make its purchases, which will be financed by the issue of government bills, will be set out next week.

But he revealed that the BoE would first focus on purchases of corporate bonds, commercial paper, and paper issued under the Credit Guarantee Scheme for the recapitalised banks.

"I hope that by offering to purchase assets on a regular and ongoing basis the facility should help to improve market liquidity," King said.

The BoE would also consult with market participants, he said, about plans to buy syndicated loans and asset-backed securities.

"I expect the amount of assets purchased to increase gradually in the early stages of the facility. This will provide scope to assess the impact of those operations on market liquidity," King said.

A new company would be established to undertake the asset-buying and the BoE will publish a quarterly statement shortly after the end of each quarter.

King said that the BoE would unwind the assets it takes on when market conditions return to normal either through the securities reaching maturity or through sales.

Darling also gave the BoE powers last week to buy high quality assets for monetary policy purposes because the central bank is running out of room to cut interest rates much further given they are already at a record low of 1.5 percent.

King said last week thinking about such unconventional ways to boost the economy was sensible but that policymakers had not reached that point yet.

In his letter yesterday he said the Monetary Policy Committee would keep under review whether it wants to buy assets in order to boost the money supply thereby supporting the economy.

"If the Committee were to conclude that this would be a useful additional tool for meeting the inflation target I would inform you so that you could authorise the changes to the scale and operation of the facility that might be required," he said.

"I note that in such circumstances a further exchange of letters would take place setting out the new arrangements."