The Financial Times (FT) reported on comments made by the UK’s House of Lords Committee, which emphasized the need for the Bank of England (BOE) to keep inflation under control.
“The House of Lords economic affairs committee, which includes former BoE governor Mervyn King, said on Friday that the BoE had failed to justify its flagship QE policy — the practice by which central banks seek to stimulate spending by creating money and pumping it into the economy by purchasing assets,” according to the news, which was published early Friday in Asia.
The research acknowledged that the impact of quantitative easing on inflation was unknown, but found that the most recent round could be inflationary because it coincided with a rising economy, significant government spending, and very high personal savings.
The central bank’s bond purchases were tightly coordinated with the speed of issuance by the Treasury, according to the research, and the central bank was “widely regarded” to be using QE to finance the government’s deficit during the pandemic.
The paper also urges the Bank of England to lay out a road map for unwinding QE and to talk more openly about the program’s adverse consequences, including inequality.
The Bank of England rejected the committee’s findings, claiming it was incorrect to suggest QE was used to fund the government.
While the news pushes the Bank of England to taper and raise rates, the GBP/USD remains unresponsive. As a result, the quote fades from 1.3805 to 1.3830./n
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