The Financial Times (FT) covered remarks from the UK’s House of Lords Committee to highlight the push for the Bank of England (BOE) to tame inflation.
The news, published early Friday in Asia, reads, “The House of Lords economic affairs committee, which includes former BoE governor Mervyn King, said on Friday that the BoE had failed to justify its flagship QE policy — the practice by which central banks seek to stimulate spending by creating money and pumping it into the economy by purchasing assets.”
Additional details (from FT)
The report noted that the QE impact on inflation was unclear but concluded that the latest round could be inflationary as it coincided with a growing economy, substantial government spending and very high levels of personal savings.
The report flagged that the BoE was “widely perceived” to be using QE to finance the government’s deficit during the pandemic, as the central bank’s bond purchases were aligned closely with the speed of issuance by the Treasury.
The report also calls for the BoE to outline a road map that demonstrates how it intends to unwind QE and to engage more openly about the side-effects of the program, particularly inequality.
The BoE rejected the committee’s conclusions, saying it was wrong to suggest QE was designed to finance the government.
While the news pressures the BOE towards tapering and rate hikes, the GBP/USD fails to react. That said, the quote fades bounce off 1.3805 around 1.3830.