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Ethos, journal of the Civil Service College Singapore

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Explore diverse perspectives in public policy and governance

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Governments and central banks like there to be "just enough" growth in an economy - not too much that could lead to inflation getting out of control, but not so little that there is stagnation. Their aim is the so-called "Goldilocks economy" - not too hot, but not too cold.

One of the main tools they have to control growth is raising or lowering interest rates. Lower interest rates encourage people or companies to spend money, rather than save.

But when interest rates are at almost zero, central banks need to adopt different tactics - such as pumping money directly into the financial system.

This process is known as quantitative easing, or QE.

How does it work?

The central bank buys assets, usually government bonds, with money it has "printed" - or, more accurately, created electronically.

It then uses this money to buy bonds from investors such as banks or pension funds. This increases the overall amount of useable funds in the financial system. Making more money available is supposed to encourage financial institutions to lend more to businesses and individuals.

It can also push interest rates lower across the economy, even when the central bank's own rates are just about as low as they can go. This in turn should allow businesses to invest and consumers to spend more, giving a knock-on boost to the economy.

What are the risks?

The biggest concern is that pumping more money into the economy could ultimately lead to an inflation problem.

When inflation is close to zero, as it is in the UK and the eurozone at the moment, a bit more upward pressure on prices can be seen as a good thing. But some politicians and economists have opposed the idea of QE in principle, because they believe in the long run there's a danger that it could create too much inflation.

Others argue that the extra money has just bolstered the price of some assets such as shares and property in some countries.

Who has tried QE?

Both the Bank of England and the US Federal Reserve embarked on QE in the wake of the 2008 financial crisis in an attempt to stimulate economic growth.

Between 2008 and 2015, the US Federal Reserve in total bought bonds worth more than $3.7 trillion.

The UK created £375bn ($550bn) of new money in its QE programme between 2009 and 2012.

Then in August 2016, the Bank of England said it would buy £60bn of UK government bonds and £10bn of corporate bonds, amid uncertainty over the Brexit process and worries about productivity and economic growth.

The eurozone began its programme of QE in January 2015 and has so far pumped in $600bn of extra money. Originally the programme was set to run until September 2016, but it has now been extended until at least March 2017.

QE was first attempted by Japan's central bank to arrest a period of deflation following its financial turmoil in the 1990s. There is disagreement about whether the initiative had the intended effect of stimulating the Japanese economy.

Has QE worked?

Its effect is hotly contested and hard to measure. Over the last few years, the US economy has stabilised and unemployment has fallen steadily. Some credit QE for the recovery, at least in part.

European Central Bank governor Mario Draghi said in June 2015 that the policy had "contributed to a broad-based easing in financial conditions, a recovery in inflation expectations and more favourable borrowing conditions for firms and households".

In the UK, it was introduced for similar reasons and it has been argued that its introduction in 2009 helped credit conditions and overall financial stability.

Are there any losers from QE?

QE pushes up the market price of government bonds and reduces the yield, or interest rate, paid out to investors. In other words, investors have to pay more to get the same income.

If market interest rates are lower that depresses the value of a currency because it becomes less attractive to foreign investors.

The US's programme of QE also kept the value of the dollar lower than it might otherwise have been, a factor not welcomed in some emerging economies. Since the end of QE in the US and with the prospect of interest rate rises there, the dollar has regained strength.

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Governments and central banks like there to be "just enough" growth in an economy - not too much that could lead to inflation getting out of control, but not so little that there is stagnation. Their aim is the so-called "Goldilocks economy" - not too hot, but not too cold.

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The role of the Bank of England - Part 3: Controlling Spending

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Keeping on an even keel: the role of the Bank of England is a short film that uses nautical metaphors and animation to explain the Bank's roles and responsibilities in an accessible, imaginative and entertaining way. The film is divided into seven short modules, which provide a simple guide to the Bank's monetary policy and financial stability roles.

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The Bank of England has left interest rates at their record low of 0.25% but repeated a warning that higher inflation and slower wage growth risk squeezing household budgets and spending next year.

The Bank's nine-strong monetary policy committee voted unanimously to keep rates on hold and maintain the current programme of electronic money printing known as quantitative easing. Policymakers had cut rates and expanded QE back in August to shore up confidence in the wake of June's vote to leave the EU.

In minutes to its final meeting of the year, the MPC said it would continue to trade off the effects of a weaker pound raising inflation against the prospects of economic growth and employment slowing. For now, policymakers said they saw no need to change policy as little had appeared to change since the MPC published its forecasts for the economy in November's inflation report.

"A slowdown in growth remained likely, but there had been little news since the time of the November inflation report about domestic activity and, although the near-term global outlook had improved, this was counterbalanced by more elevated risks," the minutes said.

The pound fell after the minutes said inflation may not rise as quickly as it expected in the near-term. "Since the Committee's previous meeting, sterling's trade-weighted exchange rate has appreciated by over 6%, while dollar oil prices have risen by 14%. All else equal, this would result in a slightly lower path for inflation than envisaged in the November inflation report, though it is still likely to overshoot the target later in 2017 and through 2018," the minutes said.

The minutes also highlighted a "notable decline in consumer confidence" and signs of businesses being nervous about the longer-term. They repeated a forecast for unemployment to rise next year and for inflation to overtake pay growth "marginally" in 2017.

There were early warning signs on Thursday that higher prices are forcing some people to cut back. Official figures showed retail sales continued to grow in November but at a markedly slower pace as fuel sales slowed amid higher pump prices.

The MPC also reiterated its previous stance that it was ready to make monetary policy tighter or looser depending on how the economy evolves as the Brexit process gets under way.

"Monetary policy could respond, in either direction, to changes to the economic outlook as they unfolded to ensure a sustainable return of inflation to the 2% target."

Ian Shepherdson, chief economist at the consultancy Pantheon Macroeconomics said the minutes' reiteration that the Bank was ready to move in either direction reflected "great uncertainty ahead" and he expected the MPC to continue to hold borrowing costs for many months to come, rather than reacting to higher inflation with a rate rise.

"Growth is expected to slow and the MPC's base case remains that higher inflation will not become embedded into wages and inflation expectations - some measures of which have risen, they noted - so the Bank can continue to look through the inflation spike. We think Bank Rate will be on hold throughout 2017."

Inflation picked up last month but was still well below the target at 1.2%. Because inflation was more than a percentage point off target at 0.9% in October, the Bank's governor had to write an open letter to chancellor Philip Hammond. His exchange of letters with Hammond was published alongside Thursday's minutes. Carney told the chancellor inflation would soon pick up on higher import costs.

City economists had not expected a move in either direction on interest rates after a series of speeches from policymakers had suggested they will be in wait-and-see mode on the economy for some time to come, weighing up signs of rising inflation against indications that business confidence has faltered.

The Bank is forecasting a slowdown in economic growth next year and a pick up in inflation, as the pound's weakness since the referendum raises the cost of imports to the UK.

The Bank's decision to keep rates on hold follows the move by its US counterpart the Federal Reserve on Wednesday to raise interest rates for the first time in a year, and only the second time since the 2008 financial crisis. The US central bank also predicted three further rates increase in 2017, up from previous expectations of two rate hikes. The Fed's main interest rate is now a range of 0.50-0.75%.

Referring to the prospect of higher government spending in the US under president-elect Donald Trump, the Bank's minutes said there could be ripple effects for the rest of the global economy.

"Since November, long-term interest rates have risen internationally, including in the United Kingdom. In part, this reflects expectations of looser fiscal policy in the United States which, if it materialises, will help to underpin the slightly greater momentum in the global economy evident in a range of data since the summer."

But it added a note of caution amid greater uncertainty around the world.

"At the same time, however, the global outlook has become more fragile, with risks in China, the euro area and some emerging markets, and an increase in policy uncertainty."
Topics

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Bank of England leaves UK interest rates on hold at 0.25%

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The Bank of England has left interest rates at their record low of 0.25% but repeated a warning that higher inflation and slower wage growth risk squeezing household budgets and spending next year. The Bank's nine-strong monetary policy committee voted unanimously to keep rates on hold and maintain the current programme of electronic money printing known as quantitative easing.

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After years of silence, monetary policy is once again a topic of political discussion. A week ago Theresa May's conference speech surprised many observers with a radical change of tune: "While monetary policy with super-low rates and quantitative easing have provided emergency medicine, we have to acknowledge some of the bad side effects. People with assets have got richer, while people without have not ... A change has got to come."

The prime minister made similar comments during her first speech after taking office and the significance of these remarks should not be underestimated. Over the past couple of decades there has been a broad consensus that the Bank of England should be left to carry out monetary policy in total isolation from the government's fiscal policy. That consensus is beginning to break.

May understands that monetary policy is not working for the majority of people. Quantitative easing (QE) is increasing inequality, and low interest rates aren't the solution for an economy that is still burdened with high levels of private debt. The tools are broken.

The Bank of England governor, Mark Carney, responded to the prime minister's comments by admitting that some had benefited more than others from QE. However, he put the responsibility of addressing inequality squarely with the government, stating: "Every monetary policy action has distributional consequences. It is not for the central bank to address these consequences. It is for the government to offset them."

But more economists are pointing out that monetary policy is in intellectual crisis. Central banks' tools of low interest rates and QE are clearly failing to boost the economy. Low interest rates have failed to stimulate the economy - we had one of the slowest recoveries from a recession in history - because people and businesses don't want to take on more debt.

Low interest rates only work by encouraging more private sector borrowing. But levels of private debt are still very high so there isn't much room to take on even more. And of course, as the IMF recently noted, the best indicator that a financial crisis isn't far off is a buildup of private debt - so it's not something central banks should be encouraging lightly.

QE is failing on its own terms and is having disastrous consequences. A growing number of economists are warning that QE is a key driver of inequality. This was confirmed by the Bank's research, which found that QE has made the top 5% of households richer by an average of £128,000 each.

Then there's the question of corporate QE. The Bank revealed details of its plans for buying £10bn of corporate bonds through its new QE programme. Carney explained that to qualify, the companies would have to make a "material contribution to the UK economy". So many were shocked when the list included foreign-owned corporations with limited UK operations, such as Apple and AT&T. It strikes many people as extraordinary that the Bank should be picking and choosing companies like this at all. David Blanchflower, a former MPC member, who was heading up Labour's review of the Bank described the Bank's corporate bond purchases as "unmandated fiscal policy".

It's becoming clear that monetary policy has impacts that are of enormous political significance, and it isn't being closely scrutinised by parliament. At a parliamentary debate on the effectiveness of quantitative easing on 15 September only eight MPs spoke. But more economists and politicians are waking up to the fact that you can't carry out monetary and fiscal policy operating in total isolation, and if we want to rebalance our economy away from housing bubbles and an oversized financial sector, then monetary policy needs a serious rethink.

An idea that is gaining traction is that monetary and fiscal policy could work together to deliver "monetary financing". Under this proposal, new money would be created by the Bank as with QE, but instead would be spent into the economy by the government to boost investment, employment and incomes. It's an idea known as people's QE.

This might sound radical, but currently, it's considered good if banks create money, regardless of whether they use it to lend to businesses or to blow up property bubbles. However, it's considered taboo if the central bank creates money to finance government spending for the real economy. It's time to break that taboo.
Topics

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Monetary policy has an enormous impact on politics. It's time for a radical rethink | Fran Boait

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After years of silence, monetary policy is once again a topic of political discussion. A week ago Theresa May's conference speech surprised many observers with a radical change of tune: "While monetary policy with super-low rates and quantitative easing have provided emergency medicine, we have to acknowledge some of the bad side effects.

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Quantitative easing - economics critique

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Forward Guidance: BoE's Carney Defends Policy

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The governor of the Bank of England has defended giving "forward guidance" on UK monetary policy, saying it will help secure the scale and duration of economic recovery.

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One of the biggest economic experiments of our age is coming to an end.

The United States Federal Reserve has called time on "quantitative easing" (QE), a policy that has pumped trillions of dollars into the US financial system.

The jury is still out - and will be for a long time - on whether it has worked.

There are real anxieties about what the consequences will ultimately be.

For now though the Fed's main policy making committee has concluded that "there has been a substantial improvement in the outlook for the labor market" and "there is sufficient underlying strength in the broader economy". So, QE is being wound up this month.

It started back in November 2008. The financial system in the US and beyond was still reeling from the failure of the investment bank Lehman Brothers.

There were widespread fears about the wider economic consequences. Were we looking at the prospect of another Great Depression?

In the US the Federal Reserve had almost run out of its traditional ammunition, cutting interest rates. So it embarked on something that was new, at least for the Fed, namely QE.

So what is it? Instead of reducing the price of money - that is, cutting interest rates - the Fed increases the quantity of money. It does that by going into the financial markets to buy assets and it creates new money to pay for them.

The Fed has focused on buying two types of assets: government debt or Treasury bonds, and assets backed by home loans.

The next question is: how is it supposed to work?

The first step is the impact on the price of the type of assets the Fed buys. More demand (from the Fed) raises the price.

To put it another way, there is less supply of these assets available for everyone else, which also tends to raise their price.

Then many of the sellers of these assets use the money to buy something else, pushing the prices of those other assets up too.

That in turn has implications for interest rates. Bonds are a kind of IOU, a promise to pay certain sums of money in the future. Governments and some companies use them to borrow money. They sell them in the financial markets. The higher the price they get the lower the interest rate they are in effect paying.

If it all goes to plan that effect can filter through the economy and reduce interest rates for many borrowers.

John Williams, a senior Fed official spelled it out in a speech in 2012 and it's worth quoting at some length: "If the Fed buys significant quantities of longer-term Treasury securities or mortgage-backed securities, then the supply of those securities available to the public falls.

"As supply falls, the prices of those securities rise and their yields decline. The effects extend to other longer-term securities.

"Mortgage rates and corporate bond yields fall as investors who sold securities to the Fed invest that money elsewhere.

"Hence, [QE] drives down a broad range of longer-term borrowing rates. And lower rates get households and businesses to spend more than they otherwise would, boosting economic activity."

The aim is to push down interest rates paid by business and households even lower than is possible by using the central bank's own conventional interest rate policies.

It's worth bearing in mind what that conventional policy is in the US. The Federal Reserve has a target for the overnight interest rate on lending between commercial banks - it's called the federal funds rate.

Reducing that does usually affect interest rates for everybody else. But when the target is practically zero as it now is, it can't go lower.

So that's where QE comes in. It provides a tool for getting rates lower for companies and consumers.

While the most important effect is on borrowing costs, QE is also thought to have been responsible for much of the strength of stock markets. Shares are among the assets that investors have bought with all the new money they have received from the Fed.

The graph highlights the impact of the Fed's QE programme. It shows the changing level of what is called the monetary base. It's made up of cash and "reserves", money held by commercial banks at the Federal Reserve. Before the financial crisis it grew steadily, but then increased dramatically from late 2008 as the Fed created new money as it sought to stimulate the US economy.

What impact?

So that's what QE is. But has it worked? Its supporters say it has kept interest rates low for households and firms, stimulated job creation and saved the US economy from a much more severe downturn, even another Great Depression.

Critics say it could lead to a new financial crisis, raging inflation and has punished responsible savers. So let's take those arguments, starting with the case for QE.

Establishing the impact is not a straightforward question. It's not a matter of is the US economy in better or worse shape than it was, but is it better or worse than it would have been without QE?

And of course you can't observe what the US economy would have looked like in those hypothetical circumstances.

So economists have tried to work out what difference QE has made.

With that caveat in mind, the former Federal Reserve chairman, Ben Bernanke, said in 2012: "There is substantial evidence that the Federal Reserve's asset purchases have lowered longer-term yields and eased broader financial conditions."

He also said that the first two rounds of QE raised economic activity by almost 3% and increased private sector jobs by two million - compared to what would have happened without QE.

Fed official John Williams said later the same year: "We're at long last seeing signs of life in the housing market. Likewise, cheap auto financing rates have spurred car sales. And historically low corporate bond rates encourage businesses to start new projects and hire more workers."

Having said that, QE has not given the US a particularly strong recovery. It has been weaker than many previous post-recession rebounds.

Nonetheless Roger Bootle of Capital Economics thinks it was worthwhile. He wrote: "I suspect that in the US it (QE), and the other support programmes, prevented a complete disaster."

So that's the case for the defence.

But there are plenty of opponents with quite a catalogue of criticisms.

A recurrent theme is the idea that QE creates a danger of surging inflation. The policy involves creating new money - an awful lot of a particular type of money - and there is a long history of economic theory that argues that rapid increases in the money supply eventually leads to higher inflation.

At this point it's important to note what type of money the Fed has been creating. It's called reserves - money held by commercial banks in accounts at the central bank.

In some circumstances increasing reserves can lead banks to lend more to the public, which creates new money in their accounts.

But this time the increase in reserves did not translate into anything like as large an increase in money in the hands of the public and inflation has so far remained relatively subdued.

Inflation pressure

Prof Martin Feldstein of Harvard University says the risk is that banks might in the future use their reserves to expand lending to firms and households, which would increase the money supply and add to inflationary pressure. But he also says the Fed has options to prevent higher inflation.

Some, including some Fed insiders, are worried that it will be difficult to get it right. One recently retired Fed economist warned of a serious inflation risk.

Prof Allan Meltzer of Carnegie Mellon University supports the first stages of QE but says "the benefits ended long ago".

He worries that by buying government debt or bonds, the Fed is in effect financing what he calls outsize deficits: "Sooner or later the results are inflation, always and everywhere."

Prof John Cochrane of Chicago University has another criticism. He describes QE as a policy that creates a lot of noise but no real effect.

It has no stimulative effect, but nor is it inflationary. But it's not harmless, he says. It distracts attention from what he considers the real obstacles to growth - tax and regulatory barriers.

Then there is the idea that QE punishes savers, by driving down interest rates, while it rewards borrowers, some of them irresponsible ones.

A study by the consultants McKinsey, published in 2013, found that the combined effect of low Fed interest rates and QE had cost US households $360bn (£220bn).

By and large younger households - who are more likely to be borrowers - had gained; older ones - with more savings - had lost.

Other estimates have put the figure even higher. The Fed's policies have even been described as a "war on seniors".

There are also concerns about the impact of QE on financial markets. Has it created a danger of another bout of financial instability?

The International Monetary Fund referred to that possibility in a recent report.

Fuelling risk

The IMF accepted that policies such as QE were important for economic recovery but it also warned of a danger of "excessive financial risk taking".

Low interest rates make it cheap to borrow money to invest in financial assets.

They also encourage investors to look for alternative assets that have higher returns, which are usually also riskier.

They may be bonds issued by less creditworthy businesses, or shares in companies with uncertain prospects.

That brings us to another criticism. One alternative chosen by many US investors seeking something more lucrative was to put money into emerging markets.

In the process they drove up the value of many of the currencies. Many people in those countries worried that they would be made less competitive as a result. In 2010 the Brazilian Finance Minister, Guido Mantega, called it a "currency war".

More recently that concern was turned on its head after the Fed signalled last year that QE was likely to be gradually "tapered" or discontinued.

There were some episodes in which emerging market currencies fell markedly as investors pulled money back to the US anticipating the end of QE and the prospect of higher interest rates.

The concern about competitiveness was overtaken by worries that falling currencies in emerging economies might aggravate inflation.

QE is one, perhaps the most important, of a range of tools often described as "unconventional monetary policies". That is quite an understatement. Throwing huge sums of money at the financial markets is something that would normally bring a central banker out in a cold sweat.

But the financial crisis was such a challenge that it led them to use tools they would normally keep locked away.

One former Fed official once put it like this: "You don't want to be found dead after a shoot-out with unused ammunition."

So QE may be ending, but we can be sure the debate about its impact will not. Has it saved the US, and perhaps the rest of us, from economic disaster?

Or has it sowed the seeds for the next financial crisis?

Quantitative Easing: Step by step

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One of the biggest economic experiments of our age is coming to an end. The United States Federal Reserve has called time on "quantitative easing" (QE), a policy that has pumped trillions of dollars into the US financial system. The jury is still out - and will be for a long time - on whether it has worked.

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The programme highlights several criticisms of Quantitative Easing, especially the Q.E. adopted by the Bank of England.

Since 2009, the Bank of England's balance sheet has quadrupled, and now a third of all government bonds are now held by Bank of England. The programme fears this is storing up future inflation and a possible loss of confidence in the bond market.

Firstly, just to recap:
Quantitative easing involves

1. Central Bank creating money electronically

2. Using this electronic money to purchase bonds (mostly government bonds)

The effect of quantitative easing has been

To reduce bond yields on government debt.

Increase money supply and bank reserves of commercial banks.

Drawbacks of quantitative easing

The new inflow of money into commercial banks from quantitative easing has encouraged banks to use this extra money through greater risk-taking. Some argue that Q.E. has increased the risk-taking nature of banks (a problem behind 2008 crisis)

Bond traders have benefited from making large profits out of the Bank of England by manipulating the bond market.

Because government debt is being financed by quantitative easing, the government has less market discipline to think about reducing fiscal deficits and tackle the underlying problem of UK public sector debt rising to 100% of GDP by 2016.

Quantitative easing has been a stealth method of reducing the value of the Pound and Dollar - and therefore making UK exports cheaper. Some commentators call this currency manipulation (or currency wars). They argue this is unfair on emerging markets who are seeing their exports become less competitive.

The increase in money supply has led to an unexpected rise in commodity prices, such as oil. This is unusual when the Western economies are in recession; rising oil prices have led to cost-push inflation.

By depressing interest rates, quantitative easing has wiped out people's return on savings (though share price rises have compensated to a certain extent.)

Quantitative easing is causing inflation in the UK. (Inflation has frequently been above the government's target of 2%, and when the velocity of circulation rises, these extra bank balances will be lent - causing a possible inflationary surge.

The scale of quantitative easing could make it impossible to sell bonds back to the market and this will damage the UK's ability to borrow in the future. If the UK's ability to borrow is constrained, this will lead to higher interest rates and reduce economic growth.

Evidence in the US suggests even raising the possibility of tapering could cause damage to the bond market, and higher interest rates. These higher interest rates could reduce economic growth.

Potential benefits of Q.E.

Low bank lending. There is no real evidence that there has been a surge in risky bank lending. In fact, the opposite has been the main concern over the past few years. - A more potent criticism of Q.E. is perhaps that it did so little to increase commercial bank lending. Bank lending is still very low compared to pre-crisis trends.

We need fiscal expansion, not austerity. It is a very good thing if Quantitative easing has reduced the need for austerity and immediate measures to cut budget deficits. If the UK has pursued Greek or Spanish style austerity, the UK recovery would have been much weaker or non-existent. A recession is not the time to tackle the public sector debt. The important thing is to promote economic growth; this will enable debt to be tackled in the long term when the economy can better absorb spending cuts and tax rises.

No currency manipulation. It is hard to accuse the UK of currency manipulation when we have a current account deficit of nearly 3% of GDP. The current account suggests the UK is still uncompetitive. Given the fact the UK GDP is still lower than in 2008, it is the correct thing for the monetary authorities to try and pursue monetary policy which promotes economic recovery and higher employment. It is not currency manipulation when you are pursuing a reasonable monetary policy given the state of the economy and lost GDP.

Inflation has not been a macroeconomic problem since 2008. The main macro-problem has been significant fall in GDP and unemployment. The Bank of England is correct to concentrate on these real problems. True, inflation has been a little above target, contributing to a reduction in real wages. But, the inflation is due to cost-push factors like rising oil prices and the effects of depreciation. There is no sign of an inflationary surge. The programme blames Q.E. for the fall in real wages. But, I believe this is wrong, the fall in real wages is because of the recession and collapse in wage growth. The best way to promote real wage growth is to target economic recovery. It is economic recovery which will enable real wage growth and higher living standards. I don't accept that Q.E. is the major factor behind falling real wages. Real wages would definitely have fallen without Q.E.

Europe inflation still too low. Inflation in the ECB is 0.8% - that is still low and creates the risk of deflationary pressures. This suggests the ECB have done too little money creation and have pursued too tight monetary policy. Unemployment in the Eurozone is 12%, significantly higher than the UK. UK unemployment may well be higher if we hadn't pursued quantitative easing.

Future inflationary surge? It is true that if the velocity of circulation rises, there could be inflationary pressure. But, given the level of unemployment and spare capacity in the economy, the inflationary surge is hard to see. It hasn't materialised in past 5 years.

The blue line is the monetary base (one form of money supply). This surge in the monetary base has had no effect on inflation.

Also, as Adam Posen says, it is possible for the Bank of England to deal with inflation, should it reappear. It is more difficult to deal with the stagnant economy.
Conclusion
Quantitative easing is an untried and imperfect policy. The programme makes good points about how traders benefited unfairly, and also it is a significant point that Q.E. has created a strong political and economic pressure group to maintain Q.E. out of selfish motives. It is also very uncertain what will happen as the economy returns to normal and the Central Banks try to taper and end Q.E. But, though it is imperfect and there is risk of different problems - given the uniquely dire state of the economy in the past few years, I still feel Q.E. was better than the alternative - that alternative was accepting a deeper and more prolonged recession.

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Quantitative easing: risks vs benefits - Economics Help

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The programme highlights several criticisms of Quantitative Easing, especially the Q.E. adopted by the Bank of England. Since 2009, the Bank of England's balance sheet has quadrupled, and now a third of all government bonds are now held by Bank of England.

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This sort revision video looks at how quantitative easing works in the UK and considers some of the arguments for and against QE as a form of unconventional monetary policy.

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MCQ Revision Question - Inflation Targets

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​Here is an interesting A level multiple choice question about what is likely to happen to interest rates and the exchange rate if the central bank of a country with a floating exchange rate opts to lower their inflation target.

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Transform Britain | Paul Mason Interviews John McDonnell

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Quantitative easing explained - in the back of a cab... | Paul Mason on the news

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Paul Mason explains the theory of quantitative easing in under four minutes. Subscribe to Channel 4 News: http://bit.ly/1sF6pOJ More from Paul Mason: http://bit.ly/1zwEPtg Read more here: http://bit.ly/1y2YvOX Top stories: http://bit.ly/1wdbIG1

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MCQ Revision Question - Quantitative Easing

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This exam multiple choice question tests student understanding of the likely effects of a central bank using QE on bond prices and the exchange rate.

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Monetary Policy: Should UK Interest Rates Rise?

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This is a 15 minute revision webinar on monetary policy in the UK economy and it focuses on a discussion about whether the Bank should now be starting to raise the base rate. ​2017 is an important year for the British economy.

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​This is a short primer video on interest rates. Students often write in exams about "the interest rate" when in fact no such interest rate exists! There are tens of thousands of different interest rates on savings and loans, the vast majority of which are set by market forces without direct central bank intervention.

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This short topic video focuses on the difference between nominal (money) and real interest rates on savings and loans.

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This topic video provides an introduction to monetary policy in the UK economy including the role played by the Bank of England.

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"bank of england" "interest bank rate" "inflation monetary policy" "financial stability" banknote central "prudential regulation" "gold bullion" vault

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The Bank of England is the central bank of the United Kingdom. It's not like a bank in your local high street. It has special functions that help keep the economy and financial system stable. You can find out more on the Bank of England website.

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This competition has now closed. Check back in September for details of the next Bank, Camera, Action competition.

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Bank of England Research Topic

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How Monetary Policy Works

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Monetary policy is the process by which the Bank of England sets the interest rate - and sometimes carries out other measures - in order to reach a target rate of inflation.

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74 Monetary policy - consolidation exercise

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73 Monetary policy - data that the MPC considers

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72 Monetary policy - transmission mechanisms Ed

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71 Monetary policy - an introduction to MPC and inflation ta