View more on these topics

Proof of QE success may take years, says Bank deputy

Bank of England deputy governor Charlie Bean has admitted that it might be years before the success of the £175bn quantitative easing project can be judged.

Speaking at the annual congress of the European Economic Association in Barcelona yesterday, Bean warned that the current economic environment could delay the money dripping down into the real economy into the next decade.

The Bank of England has currently injected more than £125bn into the UK economy through the buying of Government gilts and will add another £50bn over the coming months. It hoped that gilt-holding institutions would deposit the money into the banks who would in turn lend it out.

Bean says: “Under normal circumstances, when the asset purchases are financed by the issuance of additional central bank money, one would also expect the increase in commercial bank reserves to lead to increased lending. However, when banks are trying to de-leverage, such additional reserves are more likely to be hoarded.”

The deputy governor says this happened during the Japanese experiment with quantitative easing in the early part of this decade expects the same to happen to UK banks.

He says: “It is very early to draw conclusions on the efficacy of these measures, as the transmission lags through to nominal spending are likely to be quite long. Moreover, even in some years time, it will still be difficult to draw firm conclusions, as the counterfactual is bound to be uncertain.”

But Bean says the initial responses to these measures have been “moderately encouraging” – he says Government bond yields fell significantly at the start of the programme, and now yields appear to be around 50 to 75 basis points lower than they would otherwise be.


When is £1m not £1m?

Neil Jones is technical support manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. The residential nil-rate band (RNRB) was first announced in […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm