Effectiveness and impact of post-2008 UK monetary policy

22 December 2016

The Treasury Committee launches its inquiry into the effectiveness and impact of post-2008 monetary policy in the UK.

Interest rates are stuck near zero

Commenting on the announcement, Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Committee, said:

"Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the two per cent target for three years.

The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination.

The Treasury Committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank's monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank. The Committee will examine the risks of that, too."

Call for written submissions

The Committee invites written submissions to address any or all of the following points:

The effectiveness of monetary policy in meeting the inflation target

  • The effectiveness of holding Bank rate near zero and whether extremely low rates can encourage more, rather than less, saving
  • The effectiveness of quantitative easing and whether it has met with diminishing returns
  • The scope for further expansion of "qualitative easing" (e.g. corporate bond purchases)
  • Whether forward guidance effectively binds the Bank to a policy course, and the desirability of doing so

The unintended consequences of monetary policy

  • The impact on asset-price inflation, the housing market and financial stability
  • The implications for the long-term sustainability of pensions and savings income
  • The distributional impact
  • The impact on competition, “zombie companies” and productivity
  • The effects on the structure of relative prices in capital and commodity markets and the consequences for capital allocation, productivity and the trade cycle
  • The implications of a large balance sheet and the Treasury indemnity for Bank accountability and its relationship with the government and other agencies
  • The use of macro-prudential, fiscal and other policy to counterbalance any unintended consequences of monetary policy

The prospects for monetary policy

  • The drivers behind and prospects for low real interest rates in the UK and globally
  • What is the significance for monetary policy of rises in bond yields since the US election?
  • The impact and trade-offs of tightening monetary policy in the near-term
  • Whether monetary policy is currently out of ammunition for the next crisis
  • Options for raising the "natural rate" of interest (e.g. fiscal policy, promoting investment)

Further information

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