Lords shine the spotlight on ‘addictive’ quantitative easing
Haldane criticizes the Bank for maintaining ultra-low interest rates and a massive “quantitative easing” stimulus. A “higher inflation narrative could become the dominant theme,” he says, arguing that if policy changes are left too late, then the Bank will have to impose larger and faster rate hikes. Such a monetary “handbrake trick” means “everyone would lose out,” he said.
Bank governor Andrew Bailey calls the warnings “inflationary alarmism”, dismissing concerns about the dangers of QE. I can reveal that he now faces opposition from the powerful House of Lords Economic Affairs Committee – which will release a report on Friday entitled: “Quantitative Easing – Dangerous Dependence?” “
During their QE investigation, peers heard from central bankers and policymakers around the world, including Bailey himself. This committee includes leading economists, including former Bank Governor Mervyn King.
“We are very concerned about the continued use of QE by the Bank of England – our next report reflects this concern,” a committee source told me. “We question whether the Bank takes inflation risk seriously enough – and argue that it fails to provide rationale for some of its recent findings.”
Between 2009 and 2019, the Bank’s quantitative easing program stood at £ 425 billion, but since 2020 it has risen to £ 875 billion. So we implemented more EQ during this pandemic than during the entire previous decade. Additionally, pre-Covid QE remained largely in the financial system, so it was less inflationary than the last variant – which, as this report makes clear, was used to fund leave and support programs for people. companies.