Source · Select Committees · Treasury Committee
Recommendation 14
14
Acknowledged
Paragraph: 75
Bank officials hold divergent views on the economic impact of later Quantitative Easing rounds.
Conclusion
It is right to say that the overall effectiveness and value-for-money of QE and QT should be judged by their wider macroeconomic impacts on inflation, growth, and employment, rather than on the direct fiscal costs alone. There is agreement among many that certain rounds of QE, especially the initial rounds, were effective and easily justify the later fiscal cost. However, there is a spread of views about the relative economic impact of later rounds of QE, including, it seems, among Bank officials.
Government Response Summary
The Bank acknowledges the committee's observation on judging QE/QT effectiveness by wider macroeconomic impacts, but emphasizes that ongoing evaluation of monetary policy decisions for value for money would hinder MPC independence, while confirming the framework design remains under review.
Paragraph Reference:
75
Government Response
Acknowledged
HM Government
Acknowledged
When assessing value for money and considering the overall fiscal impact of QE, as noted by the OBR, the impact on the wider economy and public finances must be accounted for. Evaluating the overall value for money of monetary policy decisions on an ongoing basis would not support the MPC’s ability to conduct monetary policy independently, or deliver its price stability objective. However, we keep the design of the framework in which those policy decisions are made under review. It is also important to note that the fiscal implications of QE and QT are not simply captured by cashflows between the APF and HMT, but also through the wider impact of the policy on financial conditions and the economy. The OBR, for example, noted in November that its assessment of lifetime cashflows associated with QE and QT did not amount to an assessment of the overall fiscal, let alone economic, impacts of QE, which reduced borrowing costs, lowered unemployment, supported the economy and helped stem disinflationary pressures at various points over the past 15 years.