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In 2009, the MPC began a programme of asset purchases or quantitative easing (QE), intended as a temporary measure to support the economy in the aftermath of the Global Financial Crisis. But a decade on from its introduction in the UK, QE has become bigger, broader and more persistent than expected.
In 2019 the Bank’s Court commissioned the IEO Evaluation of the Bank’s approach to QE. The IEO was asked to carry out an end-to-end evaluation of the QE rounds between 2009 and 2016. That covers the Bank’s understanding of how QE works, tool design and implementation, governance and risk management and communication.
The report shows that the Bank has delivered asset purchase programmes effectively. There has been impressive and collaborative staff input to deliver innovative programmes at pace over a number of rounds of QE. The Bank’s researchers made a valuable contribution to the growing literature on the effects of QE – especially in the early stages. The Bank has developed strong governance and risk management to underpin delivery of QE. The bespoke technical infrastructure that facilitates purchases has proved resilient, overseen by experienced staff. And the Bank has honed its communications on what is a complex tool. As a new tool, QE brought a range of new challenges. And as the size and persistence of QE has grown, so has the importance of learning about how it works, ensuring its robust implementation and building public understanding of the tool. These challenges motivate our recommendations.
The IEO’s recommendations fall under three themes. The first considers how the Bank can continue to advance and apply its technical understanding of QE, given that important knowledge gaps remain. The second looks to ensure that the governance and implementation of QE remain fit for the future, recognising the complexity and risk considerations of asset purchases. And the third focuses on building public understanding and trust in QE, a tool which remains poorly understood and often contentious. Taken together these three themes and accompanying recommendations can help to reinforce QE’s role in the Bank’s toolkit. And the lessons from the first decade of using QE can also inform the Bank’s approach to future policy design.