The effects of quantitative easing on the British economy remain unclear, according to the Bank of Englands Quarterly Bulletin. The report, published today, analyses the impact of the Banks Asset Purchase Facility (APF), which started buying gilts and corporate bonds earlier this year.
At its March meeting, the Banks Monetary Policy Committee (MPC) announced that it would buy 75 billion of assets in a bid to boost money supply. The MPC expanded the facility by a further 50 billion in May and, as of May 21, the APF held about 64 billion in gilts, 2.25 billion in commercial paper and 600m in corporate bonds.
While the Bank has so far restricted the scheme to three asset types, other assets, such as paper issued under the Credit Guarantee Scheme, syndicated loans and certain types of asset-backed securities, are eligible for purchase by the APF. The Bank may also request that other assets are added to the list.
However, the report concludes that there is considerable uncertainty about the strength and timing of the effects of quantitative easing. Standard economic models are of limited use in these unusual circumstances, and the empirical evidence is extremely limited, it says.
Bank of England pursues asset purchase plans