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QE programme has still helping cut borrowing costs and boost the economy. You may also want to discuss the type of assets suitable

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  • Post Date 2018-11-05T11:47:48+00:00
  • Post Category Assignment Requirements

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QE programme has still helping cut borrowing costs and boost the economy. You may also want to discuss the type of assets suitable for central bank purchase.

QE programme has still helping cut borrowing costs and boost the economy.

 

 

One of the core reasons to practice quantitative easing in the UK is that it helps to lower borrowing costs and thereby stimulate economic growth.

 

A cheap lending rate can be beneficial, as with the low interest on loans firms begin to invest more. Meaning the market will develop, there will be more competition among businesses and in consequence, GDP will grow. In proof of this, from the website of "Office for National Statistics" (2017), we can heed that between the 4th quarter of 2016 and 1st quarter of 2017, an increase was recorded in business investment in the amount of 0.2%.

 

 

 

 

 

As stated by the Bank of England on the fourth of August 2016, the aim was to expand the asset purchase programme to "£435bn and to make up to £10bn of corporate bond purchases over 18 months." (Bankofengland.co.uk., 2017, para. 3). However, within three months the Bank of England bought corporate bonds worth about £4.9bn. It could be the fact that the Bank of England was afraid of losing trust and confidence among investors in the British economy because of the decision to leave the European Union.

 

 

 

The graph above shows the trend of confidence in business in the United Kingdom, and as we can see, the trust has increased dramatically from mid-2016 to beginning of 2017. One of the reasons for this was the fact that the Central Bank invested in the further operation of the companies by buying their assets and implementing a programme of electronic money printing.

 

 


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