Source · Select Committees · Treasury Committee
Fifth Report - Quantitative Tightening
Treasury Committee
HC 219
Published 7 February 2024
Recommendations
6
Rejected
Para 38
Develop forecasting tools for QT impact and provide quarterly public updates to Parliament
Recommendation
The Bank should develop its forecasting and modelling tools for understanding the impact of QT and look to how these can be integrated into the forecasting and communication process. Given the uncertainty over its effects, the Bank should also Quantitative …
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Government Response Summary
The government states the MPC considers QE/QT impact in annual reviews, which it deems appropriate, and includes assessments in quarterly reports. It also notes that Bank staff already use various modelling tools and quantitative analysis for QT impact, with this remaining an active research area, but does not commit to the recommended new developments or dedicated quarterly updates.
HM Treasury
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9
Rejected
Publish more frequent updates on gilt market participant demand and sentiment.
Recommendation
Given the unusually high extent of gilt sales in the coming years, the Bank and the Debt Management Office should publish more frequent updates on gilt market participant demand and sentiment. (Paragraph 51) The fiscal impact of quantitative easing and …
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Government Response Summary
The government states the Bank already publishes aggregate gilt market demand and auction results, and surveys market participants. However, it rejects the recommendation for the DMO to publish market sentiment updates, arguing it risks negatively impacting market behaviour and falls outside its mandate as a price taker.
HM Treasury
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15
Rejected
Para 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 …
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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.
HM Treasury
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22
Rejected
Examine inclusion of indemnity payments in fiscal rules debt and revisit QE/QT accounting
Recommendation
The Treasury should examine whether it is appropriate that ongoing indemnity payments are included in the debt targeted by the fiscal rules, subject to maintaining the credibility of the UK’s macroeconomic framework. For any future rounds of QT, the Treasury …
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Government Response Summary
The government rejects the recommendation to exclude indemnity payments from fiscal rules, stating substantial fiscal costs should not be ignored. It also explains that a deferred asset approach for accounting profits and losses is not feasible due to the UK's unique arrangements but commits to keeping its approach to managing cashflows under review for any future QE.
HM Treasury
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Conclusions (1)
12
Conclusion
Rejected
Para 69
While the Governor played down the impact that decisions over the pace of QT have on the scale of lifetime gains and losses arising from QE and QT, the evidence presented to us shows that there is some trade-off between the two, and more so 36 Quantitative Tightening in terms …
Government Response Summary
The government reiterates that Bank Rate is the primary active monetary policy tool and that the MPC discusses QT parameters annually. It asserts there is little evidence that a different QT pace would significantly alter overall cashflows or total costs from the APF, though it impacts the timing of losses.