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Understanding Quantitative Easing in the UK

The Bank of England creates new money electronically to buy financial assets like government bonds, injecting cash into the economy. This quantitative easing lowers borrowing costs and boosts asset prices to support spending and get inflation back to the 2% target when interest rates are low and inflation is expected to fall. The Bank can also sell assets to reduce money supply and spending if inflation risks becoming too high, with the goal of monetary policy unchanged - to meet the 2% inflation target.

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57 views1 page

Understanding Quantitative Easing in the UK

The Bank of England creates new money electronically to buy financial assets like government bonds, injecting cash into the economy. This quantitative easing lowers borrowing costs and boosts asset prices to support spending and get inflation back to the 2% target when interest rates are low and inflation is expected to fall. The Bank can also sell assets to reduce money supply and spending if inflation risks becoming too high, with the goal of monetary policy unchanged - to meet the 2% inflation target.

Uploaded by

ydee28
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Your money what the Bank does

Quantitative
Easing (QE)
injecting money
into the economy The Bank of England
creates new money
electronically to buy
If interest rates are very low financial assets like
and the Banks Monetary Policy government bonds. This
Committee expects inflation to cash injection lowers the
fall below the Governments cost of borrowing and
2% target, it can inject money boosts asset prices to
directly into the economy to support spending and get
boost spending. This is inflation back to target.
quantitative easing.

If inflation looks like being The Monetary Policy Committee


too high, the Bank of England continues to set interest rates
can sell these assets to each month, and the objective of
reduce the amount of money monetary policy is unchanged
and spending in theec onomy. to meet the Governments
2% inflation target. Quantitative
easing was first used in the UK in
March 2009.

www.bankofengland.co.uk

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