The Bank of England has now reversed £300 billion of Quantitative Easing

7 comments

1. Just another £600bn to go and we’ve fully Paid for our parents sins.

2. Something vaguely positive. Glad they have clawed it back but reducing liquidity might explain some of the pain (its a leading cause of the depression)

3. So we had 15 years of austerity and the Tories didn’t pay off a single penny of the QE?

4. Good article. One of the issues with QT is that the BoE is selling bonds at a loss, which is costing the government billions. It also pushes up gilt yields, meaning higher interest costs on new borrowing. I recall seeing an estimate that the total bill for the programme is something like £150bn (over many years) which isn’t ideal during a cost of living crisis.

   On the positive side, QT does appear to be taking some of the heat out of house prices (in real terms) and, hopefully, inflation too. Given an increasingly uncertain world, perhaps this short-term pain helps us create some monetary space for the future.

5. I was brought up on folk memories of wheelbarrows of banknotes in the Weimar Republic.

   When they did quantitative easing at first I couldn’t understand it.

   Then I realised the alternative was worse.

6. Quantitative easing has always just been a scheme to widen wealth inequality. Trickle down economics is a scam

7. This is a really bad article. It fundamentally misunderstands the role of QE and QT.

   QE was used to lower interest rates for long term bonds during the Financial Crash. It did not increase the money supply since the purchased bonds were taken out of circulation. Look at the various [money supply indicators](https://imgur.com/a/dE7tfW4). Note that both M2 and M3 were flat from 2010 to 2015.

   Additionally, the BoE does not use the QT as an active tool for monetary policy. See [this speech](https://www.bankofengland.co.uk/speech/2023/july/dave-ramsden-speech-on-quantitative-tightening-chaired-by-money-macro-and-finance-society) by the Deputy Governor of Markets and Banking Dave Ramsden.

   > The review will inform the MPC’s decision on the pace of QT. That decision will be framed by the MPC’s key principles; in particular, that QT is not the active tool for monetary policy. The Committee has a preference to use Bank Rate as its active policy tool when adjusting the stance of monetary policy. For me this means that QT should be thought of as operating in the background.

   The reason the BoE is doing QT is to reduce risk. The BoE holds on its balance sheet more long term bonds than comparable nations. Long term bonds are more risky when it comes to interest rates. Hence the BoE is selling them to reduce risk. Some of the effects of QT are outlined [this speech](https://www.bankofengland.co.uk/speech/2025/june/catherine-l-mann-fireside-chat-at-the-federal-reserve-board-of-governors) by Catherine L. Mann who is a member of the Monetary Policy Committee.

   > The Bank holds, on average, and in international comparison, a portfolio of more long-dated government bonds, which is in line with the UK government debt overall having a longer maturity structure in international comparison. This is why the Bank, more specifically the MPC, has been undertaking a mix of passive balance sheet run-off as bonds mature, and active sales – aimed at reducing the size of the APF.

Comments are closed.