[martin]

“Bank rejects more economic stimulus. The Bank of England has chosen not to inject any more money into the economy, leaving its quantitative easing programme at £375bn, and holds interest rates at 0.5%.”
Source: http://www.bbc.co.uk/news/business-21367460

Do I have this correct: Even though the Bank of England ‘has said’ it’s not inflating (not using quantitative easing) but is still continuing to artificially hold interest rates down at 0.5%, is the Bank of England in reality actually inflating (using quantitative easing) because in order to actually hold interest rates down they have to inflate in order to actually do it. In other words, the Bank of England has to actually be in the market in order to hold interest rates down because you cannot ‘just say’ that interest rates are going to be kept at this level, you have to actually do something practical… such as use inflation?

[jmherbener]

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.

http://www.bankofengland.co.uk/publications/Pages/news/2013/002.aspx

[martin]

I see what you mean. I thought quantitative easing was inflation, but saying it under a different name.

But surely the Bank of England is lying about not using QE (despite what their balance sheet says) because the government is still running a huge deficit and the Bank of England must be monetising this deficit? Or is it actually the case that the market alone is financing this deficit, and when finally the market stops, the Bank of England (as the “Lender of Last Resort”) will once again buy government debt (resume the QE program)?

It’s just that I don’t believe the Bank of England when it says it isn’t using QE.

[jmherbener]

According to its official release, the Bank of England’s balance sheet has been shrinking since the first of the year:

http://www.bankofengland.co.uk/markets/Pages/balancesheet/default.aspx

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