Source · Select Committees · Treasury Committee
Recommendation 15
15
Rejected
Paragraph: 75
Assess value for money of all past QE rounds for future selective use.
Recommendation
In its response to this report, the Bank should set out whether it thinks that all individual rounds of QE have proved to be good value for money considering the later fiscal cost. In any future QE, lessons should be learned about the effectiveness of each round of QE over 2009 to 2021 and how it might be used more selectively, partly with reference to the fiscal implications.
Government Response Summary
The Bank rejects the recommendation to assess the value for money of individual QE rounds, asserting the MPC's independence from fiscal considerations; however, the Treasury commits to keeping its approach to cashflow management under review and considering lessons learned should QE be deployed again.
Paragraph Reference:
75
Government Response
Rejected
HM Government
Rejected
The recommendation in paragraph 15 asks for an assessment of individual rounds of QE. The MPC decisions based on monetary policy purposes are taken independently by the MPC, solely to meet the MPC’s policy objectives in line with its statutory mandate to achieve the 2% inflation target. In line with these key principles judging the effectiveness of policy decisions, the MPC considered every round of QE appropriate and necessary to meet its mandate and the remit given to it by the government. QE has formed an important part of the monetary policy toolkit since the Global Financial Crisis. With Bank Rate constrained by a lower bound, the MPC turned to asset purchases as a means for providing additional monetary stimulus an supporting the economy. Asset purchases should therefore be judged on the basis of how successful they have been in supporting the MPC’s pursuit of the inflation target. As outlined in the section above identifying the impact of asset purchases is inherently challenging. However, as discussed in the Bank’s Quarterly Bulletin article, the evidence on balance suggests that QE has pushed down on longer-term borrowing costs for households and corporates, which stimulated demand and helped the MPC reach its 2% inflation target. The MPC explicitly do not take account of the profit and loss of the portfolio of assets purchased when making decisions on monetary policy. The indemnity from HMT allows monetary policymakers to focus how they set the stance of monetary policy to best achieve their mandate of price stability. The Treasury will of course keep under review its approach to best manage cashflows and consider any lessons learned in the future should QE be deployed again.