Select committee: Treasury Committee
Conclusion 1
Fifth Report - Quantitative Tightening
Published 7 Feb 2024
Paragraph 20
Addressed to HM Treasury
Treasury Committee Quantitative tightening All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
There are a variety of views about the desirability of the Bank of England undertaking quantitative tightening (QT), whether it has a good strategic framework for doing so, and whether it is conducting QT at an appropriate pace. Nonetheless, much of the evidence we have received suggests that the Bank’s strategic framework for QT is broadly reasonable. We have also heard that shrinking the Bank’s balance sheet in order to create space for future interventions, should they be needed, and reducing distortions in the gilt market caused by quantitative easing (QE), are potential reasons for going ahead with QT.
From: Treasury Committee, Fifth Report - Quantitative Tightening (HC 219), paragraph 20, 7 February 2024
Government response
The government responded to the whole report on 18 April 2024 (deadline 7 April 2024).
Summary written by Accountability Index from the government's response. It is not the government's own words.The Treasury, the Bank of England and the Debt Management Office each responded separately, and the Committee records that none of its recommendations has been fully accepted.
- The Treasury says evaluating the overall value for money of monetary policy decisions on an ongoing basis "would not support" the MPC's independence, but that it keeps the design of the framework "under review".
- On the debt metric, the Treasury's position is that "substantial fiscal costs should not be excluded"; it says fiscal rules are "not a matter for the Bank of England".
- The Bank says a deferred asset accounting approach "would not be feasible", and that changing the accounting treatment "would not alter the underlying public sector impacts" of QE or QT.
- The Bank is "working at pace to launch an initial version" of a lending facility for insurance companies and pension funds, and says its next MPC QT review is in September.