Bank set to unwind QE life support

THE Bank of England will begin to actively unwind its massive money- printing programme which pumped billions of pounds into the economy during Covid.

Officials on Threadneedle Street said that from September, subject to a final vote, they would start selling the vast pile of government bonds they had accumulated.

The quantitative easing (QE) programme was launched in the financial crisis, but revived during the pandemic.

It involved the Bank buying hundreds of billions of pounds of gilts – or debt loaned to the Government – from investors, freeing up more money for them to spend elsewhere in the economy.

But the Bank plans to sell those gilts back, tightening monetary policy in an attempt to bring inflation down from its 40-year highs. Governor Andrew Bailey said he expected to reduce gilt holdings by around £80bn over the year.

While this could help bring inflation down, it is likely to push up the cost of borrowing – the market will be awash with gilts, so their cost will fall, meaning the effective interest rate which they pay out will be higher.