Reply To: No Quantitative Easing… But Still Low Interest Rates?


Like our Fed, the Bank of England targets the interest rate banks pay to borrow reserves from other banks. In the U.S. this rate is called the Federal Funds Rate. In England it’s called the Bank Rate. When the central bank targets the rate, they strive to keep it at the target by offsetting any change in demand banks have for reserves by increasing supply through the purchase of assets from banks.

As I understand its official release on the policy, the Bank of England has decided not to expand the quantitative easing program. The QE program was a special program to counter the financial crisis. So, if it wants to increase bank reserves to keep the Bank Rate at 0.005, it can use the regular program of purchasing bank assets.
In the U.S., the regular program is called “open market operations.” Technically, it’s a separate program from the QEs.