What is Quantitative Easing or QE?

QE is a tool used by the Bank of England to buy things like government gilts and other bonds in the open market. Those selling receive a bank deposit. Sellers tend to be Pension Funds and Insurance Companies, but can be other central banks and commercial banks.

QE does not print money and does not cause inflation. For the economy, it is an exchange of assets: gilts for bank deposits. Since bank deposits generally pay less interest than gilts, the economy receives less interest income.

The Bank of England hopes this reduced interest income will boost a wide range of financial asset prices. They hope higher asset prices will lead to banks making it cheaper for households and businesses to borrow money and that will lead to more spending.

For more information, please see our fact sheet at https://gimms.org.uk/fact-sheets/quantitative-easing/