Latest news with #quantitativeEasing
The Guardian
08-07-2025
- Business
- The Guardian
Britain remains trapped in poor economic policy
Randeep Ramesh certainly tackles a worthwhile and complex modern economic policy conundrum (Labour could find the money it wants without raising taxes. This is austerity by amnesia, 29 June). But his opinion that the Bank of England should simply hand over the cash proceeds from quantitative tightening (QT) and that central bank independence is somehow partly responsible for Britain's economic woes, are misguided. Central bank independence was hard-won and has largely proven a resounding success in the developed world for more than 30 years. Allowing a central bank to hand over substantial moneys from QT revenues to the Treasury would be a recipe for disaster, against the spirit if not the letter of the law, as well as a dangerous precedent. More broadly, there is merit in Ramesh's push to coordinate fiscal and monetary policy better. Neither the Treasury nor the Bank are immune to criticism in their failures to act earlier to stave off the inevitable post-Covid inflation spike by raising rates more quickly in late 2021-early 2022, before the Ukraine war. Equally, the Treasury may have acted in a more nuanced fashion in removing the government-led stimulus NewmanLondon A big thank you to Randeep Ramesh for explaining the implications of quantitative easing (QE) and QT. This insane orthodoxy simply gives public money to banks and the City. In 2007-08, the then Bank governor, Mervyn King, pontificated about 'moral hazards' for banks with regard to their risky behaviour, but then it was the public purse that took the hit from the crash and has been picking up the tab ever since. It is a parasitic system geared to the benefit of the City and the oligarchy. Gordon Brown's granting of independence to the Bank was a mistake, driven by his anxiety to reassure the City that Labour was not a threat. Running the economy is profoundly political and ideological, and the notion that only state technocrats can be trusted with monetary policy is nonsense. Rachel Reeves is making the same mistake by trying to fit her spending to Office for Budget Responsibility (OBR) predictions. The creation of the OBR was simply a George Osborne wheeze to help justify his disastrous austerity policy, which Reeves is in danger of WoodKidlington, Oxfordshire Have an opinion on anything you've read in the Guardian today? Please email us your letter and it will be considered for publication in our letters section.
Yahoo
05-07-2025
- Business
- Yahoo
Buying bonds didn't boost economy, admits Bank of England
The Bank of England's bond-buying experiments in the financial crisis lined investors' pockets rather than boosting the economy, officials have admitted. It created £20bn to buy bonds issued by companies as part of its quantitative easing (QE) programme in the hope of lowering borrowing costs and supporting the economy. But research published by the Bank shows the companies instead channelled the money to shareholders through boosting the stock market. It adds to the criticism surrounding the wider QE scheme, which kicked off in 2009 and ultimately grew to £895bn. Critics argue it worsened inequality and is now draining the public purse, while its supporters see it as a vital aid to the economy at times of crisis. The £20bn of corporate QE created a 'boom' in borrowing by businesses which swooped in to make the most of lower interest bills, according to a working paper from the central bank. 'The fall in corporate bond yields appears to have caused a boom in issuances by non-financial companies in the UK. Between January 2003 and the end of February 2009, these companies issued a total of £180.85bn. 'The additional low-cost funding has not translated into real effects, as the issuing companies chose to use the funds to substitute away from bank borrowing and buy back their shares to boost their prices.' It means they favoured pocketing the cash 'rather than real investment,' said the report, written by the Bank's Mahmoud Fatouh, and academics Simone Giansante and Meryem Duygun. To be eligible for the scheme, the bonds had to come from companies with good credit ratings and significant operations in the UK – which meant even foreign businesses such as Apple and McDonald's. BMW and Volkswagen were among those whose bonds were bought by the Bank, as were storied British companies including tobacco giant Imperial Brands. The corporate bond portfolio was largely sold off by 2023 and the final bonds bought under this part of the scheme matured in 2024. The Bank first launched QE as officials sought new ways to try to support the economy and the financial system in the credit crunch, when the Bank's Monetary Policy Committee had already cut interest rates to 0.5pc. At the time that was a record low, and was considered to be the lowest practical level. After the Brexit vote, the MPC cut the base rate to 0.25pc, and in the pandemic it reached a fresh low of 0.1pc. The biggest chunk of QE was the purchase of government bonds, which totalled £875bn. This was deemed to have boosted the economy and lowered unemployment while supporting inflation, in an era when the pace of prices rises repeatedly fell below the Bank's 2pc target. It also helped push down government borrowing costs, supporting heavy spending at a time when the public purse was under strain. However, the policy was also criticised for boosting asset prices, and so supporting the rich. Cash flow from the QE scheme initially made profits which the Bank passed on to the Treasury. But since interest rates increased sharply from the end of 2021 amid the post-pandemic cost of living crisis, the Treasury has had to transfer funds back to the Bank. The net cumulative loss from the scheme is forecast to rise as high as £150bn in the years to come. Reform UK has called for the Bank to stem these losses by ceasing to pay interest on the reserves held by commercial banks. Andrew Bailey, the Bank's Governor, has cautioned that these payments are an important part of the way in which interest rate decisions made by the MPC pass through to the wider economy. In a letter to Richard Tice, a Reform MP, last week, Mr Bailey said: 'Our implementation of the MPC's chosen level for Bank Rate is anchored by remunerating reserve accounts at that rate. This helps to ensure that the rates at which banks lend to businesses and households – and the rates they pay on customers' savings – move broadly with Bank Rate'. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Telegraph
05-07-2025
- Business
- Telegraph
Buying bonds didn't boost economy, admits Bank of England
The Bank of England's bond-buying experiments in the financial crisis lined investors' pockets rather than boosting the economy, officials have admitted. It created £20bn to buy bonds issued by companies as part of its quantitative easing (QE) programme in the hope of lowering borrowing costs and supporting the economy. But research published by the Bank shows the companies instead channelled the money to shareholders through boosting the stock market. It adds to the criticism surrounding the wider QE scheme, which kicked off in 2009 and ultimately grew to £895bn. Critics argue it worsened inequality and is now draining the public purse, while its supporters see it as a vital aid to the economy at times of crisis. The £20bn of corporate QE created a 'boom' in borrowing by businesses which swooped in to make the most of lower interest bills, according to a working paper from the central bank. 'The fall in corporate bond yields appears to have caused a boom in issuances by non-financial companies in the UK. Between January 2003 and the end of February 2009, these companies issued a total of £180.85bn. 'The additional low-cost funding has not translated into real effects, as the issuing companies chose to use the funds to substitute away from bank borrowing and buy back their shares to boost their prices.' It means they favoured pocketing the cash 'rather than real investment,' said the report, written by the Bank's Mahmoud Fatouh, and academics Simone Giansante and Meryem Duygun. To be eligible for the scheme, the bonds had to come from companies with good credit ratings and significant operations in the UK – which meant even foreign businesses such as Apple and McDonald's. BMW and Volkswagen were among those whose bonds were bought by the Bank, as were storied British companies including tobacco giant Imperial Brands. The corporate bond portfolio was largely sold off by 2023 and the final bonds bought under this part of the scheme matured in 2024. The Bank first launched QE as officials sought new ways to try to support the economy and the financial system in the credit crunch, when the Bank's Monetary Policy Committee had already cut interest rates to 0.5pc. At the time that was a record low, and was considered to be the lowest practical level. After the Brexit vote, the MPC cut the base rate to 0.25pc, and in the pandemic it reached a fresh low of 0.1pc. The biggest chunk of QE was the purchase of government bonds, which totalled £875bn. This was deemed to have boosted the economy and lowered unemployment while supporting inflation, in an era when the pace of prices rises repeatedly fell below the Bank's 2pc target. It also helped push down government borrowing costs, supporting heavy spending at a time when the public purse was under strain. However, the policy was also criticised for boosting asset prices, and so supporting the rich. Cash flow from the QE scheme initially made profits which the Bank passed on to the Treasury. But since interest rates increased sharply from the end of 2021 amid the post-pandemic cost of living crisis, the Treasury has had to transfer funds back to the Bank. The net cumulative loss from the scheme is forecast to rise as high as £150bn in the years to come. Reform UK has called for the Bank to stem these losses by ceasing to pay interest on the reserves held by commercial banks. Andrew Bailey, the Bank's Governor, has cautioned that these payments are an important part of the way in which interest rate decisions made by the MPC pass through to the wider economy. In a letter to Richard Tice, a Reform MP, last week, Mr Bailey said: 'Our implementation of the MPC's chosen level for Bank Rate is anchored by remunerating reserve accounts at that rate. This helps to ensure that the rates at which banks lend to businesses and households – and the rates they pay on customers' savings – move broadly with Bank Rate'.
Bloomberg
04-07-2025
- Business
- Bloomberg
BOE Corporate Bond Buying Failed to Aid Firms, Staff Paper Finds
The Bank of England's £20 billion ($27.3 billion) of corporate bond purchases failed to lower borrowing costs or boost bond issuance in the primary market, according to the central bank's own research. While yields for eligible bonds bought under quantitative easing fell by between 40 to 60 basis points when compared to ineligible debt, the BOE staff working paper admitted that it did little to aid firms' borrowing or increase investment.
Reuters
03-07-2025
- Business
- Reuters
Bank of England lends record 74 billion pounds in weekly repo
July 3 (Reuters) - The Bank of England allotted a record 74.225 billion pounds ($101.32 billion) in seven-day funds in its weekly short-term repo operation on Thursday, higher than a previous record of 72.782 billion pounds set last week. The central bank uses its short-term repo operations as a way to provide banks with reserves as it sells down its stockpile of government bonds bought under its quantitative easing programme. ($1 = 0.7325 pounds)
