Economists warn Bank of England runs out of room on massive bond buying programs


Bank of America economist Robert Wood also warned that QE “at this point is defensive,” a tool that can “prevent tightening but cannot add more stimulus.”

“We think the question is more how and when does the Bank of England stimulate more than if,” Mr Wood said. He argued that the Bank’s forecast looks “very optimistic”, pointing to the possibility of further stimulus measures next year.

Mr Bailey said this week that the Bank had ‘a lot’ of firepower as concerns over a no-deal Brexit mounted. Rate regulators are expected to keep fire on more stimulus on Thursday, but the threat of new economic pressure has fueled concerns over its depleted war chest.

“QE already has [lost its potency] to a large extent because one of the channels is through lower long term interest rates and given that they are practically zero now there is not much room for them to fall. Said Mr. Beck.

“It’s not very powerful anymore, you need fiscal stimulus.”

The Bank injected an additional £ 150bn into the economy last month in response to the second foreclosure, which will bring the total amount of bonds purchased under the QE to £ 895bn. The tool stimulates the economy by lowering borrowing costs, calming bond markets, and pushing investors into riskier assets.


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