Epilogue: The Next Reactivation of Monetary Policy

Abstract

At the time of writing, early in 2014, short-term interest rates have been continuously very low for over five years, and they are expected not to increase for another year.¹ Moreover, in its quantitative easing operations between 2009 and 2012, the Bank of England bought £375 billion of gilts, in exchange for its own deposit liabilities. As a result of these and other operations, bankers’ deposits in the Bank of England amount to £297 billion.² The deposits bear interest at Bank rate and, since the Bank of England is wholly owned by the government, they represent a form of short-term government-guaranteed debt.³ In addition there are £45 billion of Treasury bills outstanding,⁴ so that total short-term interest-bearing government debt is about £342 billion, or 21% of GDP.