Quantitative tightening

Treasury Committee Closed Inquiry
Opened: 31 Jan 2023 Closed: 1 May 2024 Parliament page
This inquiry will examine quantitative tightening, including its impact on the economy and its fiscal costs. It will also investigate the role of quantitative easing and tightening in the current outbreak of double-digit inflation and in bringing inflation down. Read the call for evidence to find out more about the … Read more
10 Recommendations
12 Conclusions
1 Report
5 Letters
2 Events
Activity timeline 9 events
18 Apr
2024
Report published
7 Feb
2024
Report published
12 Jan
2024
Correspondence
12 Jan
2024
Correspondence
12 Jan
2024
Correspondence
12 Jan
2024
Correspondence
18 May
2023
Formal meeting (oral evidence session) · The Bank of England (Restricted in-person public access)
18 Apr
2023
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
21 Mar
2023
Correspondence
Title HC No. Published Items Response
Fifth Report - Quantitative Tightening HC 219 7 Feb 2024 22 Responded
Recommendations & Conclusions
5 results
Clear
6 Recommendation Rejected
Fifth Report - Quantitative Tighte…
Develop forecasting tools for QT impact and provide quarterly public updates to Parliament
The Bank should develop its forecasting and modelling tools for understanding the impact of QT and look to how these can be integrated into the forecasting and communication process. Given the uncertainty over its effects, the Bank should also Quantitative … Read more
Government Response
The government states the MPC considers QE/QT impact in annual reviews, which it deems appropriate, and includes assessments in quarterly reports. It also notes that Bank staff already use various modelling tools and quantitative analysis for QT impact, with this remaining an active research area, but does not commit to the recommended new developments or dedicated quarterly updates.
HM Treasury
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9 Recommendation Rejected
Fifth Report - Quantitative Tighte…
Publish more frequent updates on gilt market participant demand and sentiment.
Given the unusually high extent of gilt sales in the coming years, the Bank and the Debt Management Office should publish more frequent updates on gilt market participant demand and sentiment. (Paragraph 51) The fiscal impact of quantitative easing and … Read more
Government Response
The government states the Bank already publishes aggregate gilt market demand and auction results, and surveys market participants. However, it rejects the recommendation for the DMO to publish market sentiment updates, arguing it risks negatively impacting market behaviour and falls outside its mandate as a price taker.
HM Treasury
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12 Conclusion Rejected
Fifth Report - Quantitative Tighte…
Bank and MPC underestimate trade-offs between QT pace and annual losses.
While the Governor played down the impact that decisions over the pace of QT have on the scale of lifetime gains and losses arising from QE and QT, the evidence presented to us shows that there is some trade-off between … Read more
Government Response
The government reiterates that Bank Rate is the primary active monetary policy tool and that the MPC discusses QT parameters annually. It asserts there is little evidence that a different QT pace would significantly alter overall cashflows or total costs from the APF, though it impacts the timing of losses.
HM Treasury
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15 Recommendation Rejected
Fifth Report - Quantitative Tighte…
Assess value for money of all past QE rounds for future selective use.
In its response to this report, the Bank should set out whether it thinks that all individual rounds of QE have proved to be good value for money considering the later fiscal cost. In any future QE, lessons should be … Read more
Government Response
The Bank rejects the recommendation to assess the value for money of individual QE rounds, asserting the MPC's independence from fiscal considerations; however, the Treasury commits to keeping its approach to cashflow management under review and considering lessons learned should QE be deployed again.
HM Treasury
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22 Recommendation Rejected
Fifth Report - Quantitative Tighte…
Examine inclusion of indemnity payments in fiscal rules debt and revisit QE/QT accounting
The Treasury should examine whether it is appropriate that ongoing indemnity payments are included in the debt targeted by the fiscal rules, subject to maintaining the credibility of the UK’s macroeconomic framework. For any future rounds of QT, the Treasury … Read more
Government Response
The government rejects the recommendation to exclude indemnity payments from fiscal rules, stating substantial fiscal costs should not be ignored. It also explains that a deferred asset approach for accounting profits and losses is not feasible due to the UK's unique arrangements but commits to keeping its approach to managing cashflows under review for any future QE.
HM Treasury
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Government Response AI assessment · 22 of 10 classified
Accepted 9
Acknowledged 6
Deferred 1
Not Addressed 1
Rejected 5
Total 10 recs + 12 conclusions
Correspondence 5 letters
12 Jan 2024 From committee Letter to Bank of England relating to Cashflows arising from quantitative easing and tightening, dated 4 December
Parliament page
12 Jan 2024 From committee Letter to HM Treasury, Permanent Secretary relating to Cashflows arising from quantitative easing and tightening, dated 4 December
Parliament page
12 Jan 2024 To committee Letter from Bank of England relating to Cashflows arising from quantitative easing and tightening, dated 18 December
Parliament page
12 Jan 2024 To committee Letter from HM Treasury, Permanent Secretary relating to Cashflows arising from quantitative easing and tightening, dated 15 December
Parliament page
21 Mar 2023 Correspondence from the Bank of England relating to the inquiry into Quantitative Tightening, dated 16 March
Parliament page