If pursued, this programme might reduce the current scale of bond sales by the Bank of England, which could, as a consequence, slightly ease upward pressure on interest rates, but by very little. That is because the guidance given is almost as important when it comes to long-term interest rates, which is what QE and QT are meant to influence, and the clear indication given is that the Bank wishes to dispose of all the bonds that it acquired after the 2008 financial crisis and the financial crisis of 2020, which arose as a consequence of Covid.
This decision makes no sense at all.
First, it gives the clearest possible indication that the Bank of England is intent on keeping interest rates in this country above the level they would naturally be for years to come.
So, we did something to reduce interest rates: QE. Reversing that is QT.
But if we do QT this raises interest rates above where they would naturally be? Eh? But we’ve just agreed that we artificially lowered them with QE…..
The first is that the Bank of England has no comprehension at all of inflation, or the impact of monetary policy on it.
Oh, right.
The logic is baffling: distorting the market with QE is genius, but fixing that distortion with QT is a crime.
It is just an excuse to demand infinite money printing while pretending flooding the economy with cash has zero impact on inflation.
How very original!
Didn’t Spud say previously that QE would never be reversed?
It hasn’t been yet. We are 17 years from the first round of QE and the BoE balance sheet shows that it still holds over half the amount of gilts it has ever bought. So the BoE is still a long way from reversing all the QE it has indulged in. If something nasty happens to the economy at some point then you can bet that QT will be rapidly abandoned and the printing presses turned on again. I suspect QE will never be fully reversed, because some reason to print some more will always arise before the last lot can be removed from the economy.
If all goes to plan then the potato can set interest rates in an independent Scotland
Roll up! Roll Up! See him riding two hobby horses at the same time. The world’s most prolific disaster-predictor seems oddly blind to the actual economic disasters we’re facing.
QE is proof that the Fed and the Bank of England have no comprehension of inflation. Murph is right on this point. Just concede graciously and move on to the next debating point.
I increasingly despair… if the beer pumps run dry I’ll go postal. Other than that I think my caring facility is shutting up shop.
I wanna be sedated
Let’s have a vote on this.
Who would prefer the Bank of England didn’t have any monetary policy at all?