Negative interest rates are the last thing the economy needs (City AM)

Ewan Stewart’s report, ‘Masking the Symptoms: why QE and huge deficits are not the answer’, published by the Centre for Policy Studies in February 2013, was cited in City AM Editor Allister Heath’s column on Wednesday 27th February 2013.

To view the full article, please visit the City AM website

“Just in case anybody was still in doubt that yet more quantitative easing (QE) and extraordinary monetary measures are on the cards, Paul Tucker, the Bank of England’s deputy governor, could not have been any clearer yesterday. He even raised the prospect of the Bank of England imposing negative nominal interest rates, at least on commercial banks’ reserves lodged with it, in a bid to get the money circulating instead. We already have negative real interest rates at the moment, with the interest far lower than the rate of inflation. But negative nominal rates would represent a complete break with the status quo: depositors would have to pay their bank, rather than the other way around. It is clear that the Bank remains extraordinarily dovish: quite remarkably, it is still trying to loosen monetary policy further.


The Centre for Policy Studies provides useful context. QE has already been larger, relative to GDP, in the UK (22 per cent) than in either the US (13 per cent) or the Eurozone (4 per cent). It has helped mop up 46 per cent of the massive issuance of UK sovereign bonds over the past five years – the volume of outstanding gilts has increased by two and a half times in just five years, by £832bn, the equivalent of £33,000 for every UK household, much of which has been monetised. QE has crippled savers, who are losing an estimated £65bn a year in interest forgone, according to Ewan Stewart, author of the research. Between January 2008 and December 2012, sterling lost 17.2 per cent of its purchasing power thanks to inflation. Why are we still so obsessed with loosening monetary policy yet further?”

To view the full artile, please visit the City AM website

To view Ewan Stewart’s report, ‘Masking the Symptoms: why QE and huge deficits are not the answer’, please click here

Date Added: Wednesday 27th February 2013