- We might see asset purchases for financial stability
- But central bankers are set to turn to more conventional policy tools
Could quantitative easing make a comeback in 2024? At first glance, this looks like a silly question. When quantitative easing (QE) was first introduced in the UK, it was 2009. Bank rate was just 0.5 per cent, and even 5.25 percentage points of interest rate cuts hadn’t managed to stimulate the economy. The Bank of England (BoE) embarked on a programme of asset purchases to boost activity and ensure that inflation could move – upwards – over the medium term. Today’s economic backdrop couldn’t be more different.
One of QE’s biggest goals is to lower long-term interest rates, providing extra monetary policy stimulus to the economy. And the case for more of the same this year looks incredibly weak: the BoE expects inflation to remain above target at 3.1 per cent even at the end of 2024. What’s more, should the BoE need to boost the economy, it can turn to a far more conventional policy tool: with the policy rate at 5.25 per cent, there is plenty of scope for interest rate cuts.