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Is the Bank of England practicing deficit financing?

Monday 1 March 2021

On Tuesday 2 March 2021 the House of Lords Economic Affairs Committee’s inquiry on Quantitative Easing (QE) will be taking evidence from two panels of witnesses.

These evidence sessions will be held remotely and streamed on Parliament TV.

At 3:00pm the Committee will hear from:

  • Rupert Harrison, Portfolio Manager and Chief Macro Strategist in the Multi-Asset Strategies group, BlackRock
  • Dr Mohamed El-Erian, President of Queens' College Cambridge and Chief Economic Adviser at Allianz.

Question they are likely to face include:

  • Are monetary policy decisions in danger of being directed by the needs of the Treasury?
  • In what ways does the Bank of England’s 2020 QE expansion differ from earlier phases?
  • In what ways does the Bank of England’s QE programme differ from QE implemented by other central banks?
  • What are the likely consequences, intended or otherwise, of loose monetary policy coinciding with large-scale fiscal stimulus?
  • Do markets, and now governments, expect central-bank interventions in periods of uncertainty?
  • Are central banks are approaching a “no-exit paradigm”?

At 4:00pm the Committee will hear from:

  • Lord Darling of Roulanish, former Chancellor of the Exchequer (2007-2010).

Question he is likely to face include:

  • Why was QE seen as the best bet for staving off financial collapse in 2009?
  • Did the Government ever expect QE to stimulate employment and growth, or was it primarily seen to be a temporary measure aimed at financial stability?
  • Do accusations that the Bank is practicing deficit financing risk discrediting QE?
  • Has the expansion of QE during the pandemic brought into question the principle of operational independence that the New Labour Government introduced in 1998?
  • Is the Bank sufficiently accountable for its QE programme?
  • What course of action should the Bank take going forwards with its QE programme?

More on this inquiry

The committee is examining Quantitative Easing in the context of the Bank of England’s operational independence, its accountability and the transparency of its decision-making. It is also considering the economic effects of Quantitative Easing, what risks are entailed, its distributional impacts and the future of the programme.

Last week the committee took evidence from the Independent Evaluation Office of the Bank of England, Legal & General and Insight Investment. You can watch the sessions back on Parliament TV.

More on the Economic Affairs Committee

The Economic Affairs Committee is one of the five permanent investigative committees in the House of Lords and is charged with considering economic affairs.

Committee Website
Twitter - @LordsEconCom

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