Evaluate  the  reasons  for  and  effect  of  quantitative  easing  (QE)  as  a  monetary  

policy  measure.    

IF2201  Monetary  Economics    

Anjali  Shah:           110056404  Rizwaan  Khan:           110015300  Anna  Panayi:           110002872  Elizabeth  Tanya  Masiyiwa:       110014205  Shabir  Balani:           100009626  Taylor  Nisbet:              Exchange  

 

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Contents  Table  MONETARY  POLICY........................................................................................................................... 2  AGGREGATE  DEMAND ..................................................................................................................... 4  QUANTITATIVE  EASING.................................................................................................................. 5  THE  EFFECTS  OF  QUANTITATIVE  EASING............................................................................. 7  How  the  UK  economy  applied  Quantitative  easing.............................................................. 9  Conclusion........................................................................................................................................... 10  Bibliography....................................................................................................................................... 12    

 

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 In   the   current   economic   environment   in   Britain,   the   government   is   trying   to   find  ways  through  policy  and  legislation  to  effectively  achieve  economic  stability.  One  of  the   main   instruments   used   to   do   so   is   Monetary   Policy;   which   is   a   demand-‐side  policy  used  by  central  banks  to  influence  macroeconomic  conditions.    The   following   report  will   define  monetary   policy   as   an   instrument  used  by   central  banks  to  achieve  specific  economic  objectives  and  evaluate  the  reasons  for  the  use  of  Quantitative   Easing   (QE)   as   a   policy  measure.  QE   has   been   extensively   used   by  three  of  the  world’s  dominant  economies  -‐  Japan,  the  United  States  and  the  United  Kingdom.  This  report  will  evaluate  the  positive  and  negative  effects  of  quantitative  easing  specifically  to  the  UK  economy.          MONETARY  POLICY  Monetary  Policy  is  an  instrument  used  by  the  central  banks  to  control  the  supply  of  money  in  the  economy.  It   is   implemented  through  open  market  operations,  setting  the   discount   rate   and   changes   in   reserve   requirements.   The   most   effective   tool  available   is   the   changing   of   the   rate   of   interest   to   achieve   economic   objectives.  Through  monetary  policy,  the  Bank  of  England  aims  to  achieve  economic  growth  and  monetary  stability.  These  tools  can  be  used  for  either  expansionary  or  contractionary  monetary   policy   to   boost   or   reduce   the   money   supply   respectively.   When   using  monetary  policy,  time  lags  have  to  be  taken  into  consideration;  typically  when  policy  is   employed,   its   effects   on   GDP  would   not   become   evident   for   5   quarters   and   its  effects  on  inflation  for  8  quarters.      In   the   UK   the   Monetary   Policy   Committee   (MPC)   makes   many   key   decisions  concerning   monetary   policy.   This   committee   is   comprised   of   9   highly   qualified  members,   all   independently   accountable   for   their   decisions   to   keep   Britain’s  economy  moving  in  the  right  direction.  The  MPC’s  main  functions  are  to  maintain  a  stable  economic  growth  and  a   low  rate  of   inflation.  This   is  achieved  by  setting   the  official   interest   rate,  which   enables   the   economy   to  meet   its   inflation   target.   This  interest   rate  affects  all  other  market   rates,   including  mortgage   rates  and   the   rates  that   banks   charge   to   businesses   as   well   as   consumers.   The   importance   of   this  mechanism   and   its   sensitivity   complicates   the   decisions   made   by   the  MPC,   as   its  affects  are  not  isolated.  The  rate  is  therefore  adjusted  on  a  monthly  basis  to  reflect  these  requirements.      Expansionary  monetary  policy  is  used  when  projected  inflation  levels  are  below  the  government   set   targets.     The   MPC   lowers   interest   rates   with   the   intention   of  manipulating   money   demand   and   money   supply,   to   affect   aggregate   expenditure  and  demand  as  illustrated  with  the  diagrams  below.      By  lowering  the  rate  of  interest,  the  quantity  of  money  demanded  increases.  Money  is   withdrawn   from   savings   accounts   and   other   long-‐term   investments   to   meet  money   demand.   This   additional   money   is   then   invested   on   a   shorter-‐term   basis,  resulting   in   an   outwards   push   in   aggregate   expenditure,   in   turn   influencing  aggregate  demand,  as  illustrated  below.    

 

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                             Demonstrated  in  Figure  11  (DineshBakshi)  the  increase  in  expenditure  has  generated  a   rise   of   aggregate   expenditure,   which   has   pushed   the   level   of   GDP,   being   the  number  of  final  goods  and  services  produced  in  a  country  in  a  year,  outwards.  This  ultimately  leads  to  a  new  equilibrium  point  of  output  at  which  prices  are  higher.                                Contractionary  policy  works   in   the  opposite  way,  where   in   the  MPC  raises   interest  rates   with   the   intention   of   lowering   levels   of   projected   inflation   so   to   meet  government  set  targets.  The  higher  interest  rate  discourages  consumption  with  the  incentive   of   being   able   to   receive   a   higher   amount   of   money   in   the   future.   This  therefore  contracts  money  supply,  as  people  are  putting  their  money  into  accounts  and   long-‐term   investments.   Ultimately,   GDP   contracts   due   to   a   fall   in   aggregate  demand,   leading   to   lower   prices   as   people   are   no   longer   looking   to   spend   in   the  short  term.                                                                                                                          1  http://www.dineshbakshi.com/ib-‐economics/macroeconomics/165-‐revision-‐notes/1899-‐monetary-‐policy-‐and-‐the-‐economy    

Figure  0  

Figure  0  

 

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     AGGREGATE  DEMAND  Monetary  policy  plays  a  dominant  role  in  controlling  aggregate  demand.  In  order  to  achieve  this  it  has  to  have  an  effect  on  one  or  more  of  the  components  of  aggregate  demand,  the  components  being:    

      AD  =  C  +  I  +  G  +  (X  –  M)    When   expansion   in   the   economy   is   required,   the   base   rate   is   lowered   in   effect  shifting  Aggregate  Demand  and  Inflation  rates.  The  effects  are  illustrated  in  Figure  3.                                                  Analysis  of  the  Effects  of  a  Decrease  in  Interest  Rates  on  the  components  of  AD      The  effect  of  the  increase  in  aggregate  demand  is  a  shift  in  the  AD  curve  to  the  right  from  AD  to  AD2  as  shown  in  Figure  32  (EconomicsHelp.org,  2011).  This  forms  a  new  equilibrium   in   the   economy.   In   turn,   economic   output   increases   from   Y1   to   Y2  resulting  in  a  decrease  in  unemployment.  The  shift   in  aggregate  demand  also  has  a  negative  economic  effect.  After   the  rightward  shift   in   the  AD  curve,   the  price   level  rises  from  P1  to  P2;  this  may  cause  an  increase  in  inflation,  which  offsets  the  results  effect  of  lowering  the  interest  rate.  Consumption  and  investment  will  decrease  with  a   higher   inflation   rate   because   higher   prices   reduce   consumer   and   investor  confidence.            

                                                                                                               2  http://www.economicshelp.org/macroeconomics/monetary-‐policy/effect-‐raising-‐interest-‐rates.html    

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 The  graph  above   shows   the  UK’s  annual   rate  of   interest   from   January   2001   to   June   2012.   Through   monetary   policy   the  government  reduced  interest  rates  to  historically  low  figures  in  order  to  reduce  the  negative  impacts  of  the  2008  economic  downturn.  The  Monetary  Policy  Committee  has   set   interest   rates   at   0.5%;   this   rate   has   not   changed   for   the   last   three   years.  According   to   Keynes’s   macroeconomic   theories,   a   liquidity   trap   can   occur   when  interest   rates   have   become   so   close   to   zero,   that   the   use   of   monetary   policy   to  decrease   interest   rates   further   will   have   no   effect   on   stimulating   the   economy.  Therefore  the  MPC  had  to  take  unconventional  methods  to  stimulate  the  economy,  which  was  quantitative  easing.  Therefore  one  could  argue  quantitative  easing  is  only  used   when   all   traditional   methods   have   been   exhausted   and   are   no   longer  applicable.        QUANTITATIVE  EASING  Quantitative  easing  is  a  monetary  policy  measure  designed  to  inject  money  directly  into   the   economy.   It   was   introduced   due   to   the   low   levels   of   spending   in   the  economy,   as   a   consequence   of   the   financial   crisis   as   well   as   the   UK   falling   into   a  liquidity  trap.  The  Bank  of  England,  through  the  MPC,  created  money  electronically  by  purchasing  financial  assets  comprised  mostly  of  government  bonds.  These  assets  are  purchased  from  insurance  companies,  pension  funds,  high  street  banks  and  non-‐bank  firms.  Through  quantitative  easing,  the  MPC  can  increase  the  level  of  spending  in  the  economy  and  stimulate  economic  growth.    As   the   Bank   of   England   purchases   bonds,   their   price   increases   and   their   yield  decreases.   Holding   money   has   an   opportunity   cost;   capital   could   be   invested  elsewhere   where   the   investor   could   earn   a   higher   rate   of   interest.   As   the  government   purchases   these   securities,   the   price   rises   because   investors   have   no  incentive  to  hold  the  capital  they  receive,  so  the  yield  decreases.  This   can   be   illustrated   through   the   Baumol-‐Tobin   model,   which   provides   a  microeconomic   explanation   of   this   analysis.   The   model   demonstrates   how   the  demand  for  money,  for  transactional  purposes,  is  sensitive  to  the  rate  of  interest.  As  

Figure  0  

 

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interest   rates   rise,   the   opportunity   cost   of   holding   capital   increases.   In   turn,   the  expected   return   on   other   investments   such   as   corporate   bonds,   stocks   and  commodities   will   increase,   reducing   the   number   of   transactions.   In   contrast,   as  interest   rates   decrease,   investors   have   more   of   an   incentive   to   hold   money   for  transactional  purposes  and  the  expected  return  on  other  investments  fall.      This   has   two   distinct   effects   on   the   institutions   from   which   these   bonds   are  purchased.  Firstly,  the  purchase  of  bonds  gives  banks  and  other  financial  institutions  more   liquidity   and   secondly,   the   sale   of   other   financial   assets   increases,   which  increases  their  value  and  decreases  their  yield.  The  Bank  of  England  aims  to  increase  the  capital  held  by  private  sector  institutions.  Greater  liquidity  gives  banks  the  ability  to   lend   more   capital   to   households   and   businesses.   For   households,   they   have   a  higher   purchasing   power;   this   raises   the   level   of   spending   increasing   aggregate  demand   through   higher   consumption.   Lower   yields   also   reduce   the   cost   of  borrowing.  Consequently,   firms  have  the  ability   to  purchase  real   investment  assets  to  increase  output  and  generate  larger  profits.    Creating   money   electronically   is   one   of   the   most   innovative   characteristics   of  quantitative  easing.  By  merely  printing,  the  central  bank  would   increase  the  supply  of  money  in  the  economy.  But  with  no  corresponding  increase  in  demand,  this  would  push  up  prices,  resulting  in  inflation.  Through  QE  the  central  bank  can  channel  funds  where   they   are   most   effective,   resulting   in   an   improvement   in   liquidity   and   an  increase   in   reserves   of   the   banking   sector.   These   are   necessary   for   Britain’s  economic  recovery  after  the  failure  in  the  banking  system.    Quantitative   easing   can   be   interpreted   with   the   equation   of   exchange;   as  government  purchase  financial  securities  the  quantity  of  money  increases  (M).  This  in  turn  increases  the  number  of  transactions  (V)  resulting  in  an  increase  in  the  level  of  output   (Y)  where   inflation   is   at   a   constant   rate  of   growth   (P).   The  MPC  aims   to  achieve   a   higher   level   of   spending   to   boost   Britain’s   economic   growth   through  quantitative  easing.      

M  +  V  =  P  +  Y3    Increasing aggregate demand through higher bank reserves may not be effective. The financial crisis showed how banks were now lending to more risky lenders who were likely to default in order to increase the number of loans granted. Granting more loans could be limited because of credit rationing. Greater capital reserves can be explained using the Quantity Theory of Money; this observes GDP and not the number of transactions as opposed to the equation of exchange explained above. The principle of this theory states that there is a direct relationship between the quantity of money in the economy and the price level of goods and services in the economy. Because the Bank of England creates money that is fed into the economy through private sector institutions, the quantity of money in the economy rises resulting in a corresponding rise in GDP. A rise in GDP is a good sign for growth and a recovering economy I also has social effects such as a rise employment.                                                                                                                3  The  equation  of  exchange  

 

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   THE  EFFECTS  OF  QUANTITATIVE  EASING  Quantitative  Easing  is  implemented  with  the  intention  of  stimulating  growth  within  a  weakened   economy.   A   lower   interest   rate   is   one   of   the   positive   outcomes   from  implementing  quantitative  easing.  Quantitative  easing  drives  down  interest  rates,  so  that  banks  can  now  borrow  at  0.5%.  As  a  result,  banks  loan  money  to  the  public  at  a  lower  interest  rate  because  of  this  increase  in  the  money  supply.  The  reason  banks  are  able  to  lend  at  lower  rates  of  interest  is  because  the  cost  of  receiving  funds  from  the  Central  Bank  is  also  lower.  Lower  interest  rates  make  it  more  appealing  to  start  borrowing  money  from  the  banks  again,  resulting  in  increased  consumer  spending  to  heighten  the  RGDP4.      One   of   the   biggest   concerns   of   working   with   quantitative   easing   is   its   effect   on  inflation.   By   increasing   the   money   supply   in   the   economy,   the   Bank   of   England  reduces  the  purchasing  value  of  the  currency.  The  target  for  the  Bank  of  England  is  to  keep  the  inflation  rate  at  2%.    This  target  has  not  been  met,  however  inflation  in  general  is  decreasing  and  on  progress  to  meet  targets.        “The  annual  inflation  rate  as  measured  by  the  Consumer  Prices  Index  fell  to  2.4%  in  June,  from  2.8%  in  May.”5  (Flanders,  2012)                            The   graph  about   shows   the  percentage   changes   in   inflation   from   the  beginning  of  2001   to   the   end   of   September   2012.   The   rate   of   inflation   had   been   on   a   steady  increase  until  it  reached  a  peak  of  5.2%  in  September  2008.  As  a  consequence  of  the  global  economic  downturn,   inflation  began  to  fall  alarmingly   in  the  third  quarter  of  2008.   In  March  2009,   the  Bank  of  England  announced  the   first   round  of  purchases  through   quantitative   easing   and   cut   the   bank   rate   to   0.5%   simultaneously.   Since  quantitative   easing  was   first   applied,   the   government’s   target   inflation   rate   of   2%  has  not  been  met  but   the   rate  of   inflation  has  been   falling.  Now   that  quantitative  easing  has  decreased,  the  inflation  rate  is  starting  to  decline  to  the  Bank  of  England’s  target  of  2%.    

                                                                                                               4  Real  GDP  5  http://www.bbc.co.uk/news/business-‐18867248  

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 Quantitative   easing   has   proven   to   be   a   tool   necessary   for   the   stimulation   of   a  suffering  economy.  However  it  has  had  adverse  effects  on  annuities,  pension  funds  and   inflation.   Annuities   and   pension   schemes   have   suffered   the   most   immediate  effects   as   a   result   of   quantitative   easing,   due   to   the  negative   correlation  between  gilts   prices   and   their   yield.   Annuity   rates   have   been   in   a   rapid   downfall   since   the  collapse  of  the  economy  and  with  quantitative  easing  in  effect,  it  has  only  made  the  situation  worse.  As   the  government   is  purchasing  bonds   from  banking   institutions,  insurance  companies  and  pension   funds,   the  bonds   that   remain   in   the  market  and  those  held  by  these   institutions   increase   in  price  but  their  yields  reduced.  Reduced  yields  lower  the  annuity  a  pensioner  can  buy.    “Annuity  rates  have  fallen  from  7.855%  for  a   level   income  for  a  65-‐year-‐old  man  in  2008  to  5.743%  in  2012,  and  in  June  alone  there  were  16  annuity  rate  cuts.”  6  (Insley,  2012)  This   means   that   in   the   year   2008   a   £100,000   pension   pot   would   receive   £7,855  income  a   year,   rather   than   the   current   £5,743  a   year   income  with   the   same   sized  pension  pot.    With  over   a   2%  decrease   in   just   four-‐years,   any   further   quantitative  easing  policies  would  hurt  the  annuity  rates  on  pension  funds.    An  unplanned  side-‐effect  of  low  interest  rates  and  quantitative  easing  was  the  rise  in  global  commodity  prices  as   investors  sought  out  higher-‐yielding  assets.  Speculation  in  the  oil  market  led  to  a  near  doubling  of  the  price  of  crude  between  early  2009  and  early  2010,  with  food  prices  also  growing  rapidly.  The  depreciated  pound  aggravated  this   as   the   annual   inflation   rate   rose   to   above   5%   resulting   in   a   reduction   in  consumer   spending   power   and   stalled   economic   recovery 7 .   This   shows   that  quantitative  easing  in  the  UK  has  had  effects  on  the  global  economy,  and  as  a  result  prices   have   been   increased   significantly   even   though   the   value   of   the   pound   has  decreased.  Without  quantitative  easing,  it  can  be  argued  that  the  value  of  the  pound  could  have   fallen  greater  and  that   the  rise   in  prices   is  only  a   temporary   issue  until  the  economy  becomes  stable  again.    

 These  lower  levels  of   interest  rates,  coupled  with  an  increase  in  the  money  supply,  made  the  sterling   less  attractive  to   investors.  Depreciation  of  the  pound  makes  UK  exports  cheaper,  providing  a  boost  to  manufacturing  and  parts  of  the  service  sector  that  trade  overseas.  This  shows  quantitative  easing  helps  British  companies  expand  globally  and  stimulate   the  economy  through  exports,  additionally  promoting  home  produce.  Another  aim  of   low   interest   rates  and  quantitative  easing  was   to  make   it  less  attractive  for  people  to  hold  cash.  This  resulted  in   investors  seeking  out  better  yields   in   property,   the   stock   market,   and   commodities   and   an   increase   in   public  economics   confidence.   Lastly,   banks   benefited   from   quantitative   easing   because  they  were  able  to  exchange  various  assets  like  the  government  gilts  for  cash,  which  they   used   to   repair   damaged   balance   sheets   as   a   result   of   the   financial   crisis.  Without  quantitative  easing,  banks  would  not  have  been  able  to  repair  their  critical  

                                                                                                               6  http://www.guardian.co.uk/money/2012/jul/05/quantitative-‐easing-‐affect-‐annuities-‐pensions-‐inflation    7  http://www.guardian.co.uk/business/2012/mar/08/low-‐interest-‐rates-‐qe-‐winners-‐losers

 

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conditions   and   restore   consumer   confidence;   therefore   quantitative   easing   was   a  necessary  step  in  ensuring  short-‐term  financial  stability.      

 How  the  UK  economy  applied  Quantitative  easing  As  the  Bank  of  England  has  a  high  level  of  independence,  it  had  a  pivotal  role  in  the  crisis   and   in   applying   quantitative   easing.   In   January   2009   amid   the   continuing  financial  crises,   the  Chancellor  of  the  Exchequer  authorised  the  Bank  of  England  to  set  up  the  Asset  Purchase  Facility  (APF).  The  Asset  Purchase  Facility  was  created  to  “buy  high-‐quality  assets   financed  by  the   issue  of  Treasury  bills  and  the  DMO’s  cash  management  operations”8  (Bank  of  England,  December).    The   aim   was   to   create   liquidity   in   credit   markets   to   encourage   spending   and  furthermore  boost  economic  growth.  As  highlighted  previously,  by  purchasing  open  market   securities   issued   by   the   government   in   the   form   of   gilts   and   high   quality  corporate   bonds   from   the   private   sector,   they   would   inject   the   economy   with  money.  Moreover,  by  purchasing  these  assets,  they  drive  up  the  price  reducing  the  yields   and   encourage   money   to   be   invested   elsewhere,   which   would   stimulate  growth.  Figure  6  highlights  how  much  quantitative  easing  has  been  undertaken  by  the  Bank  of  England  as  of  1st  January  2008  until  the  1st  of  November  2012.      Figure  1  

 

(Taken  from  the  Bank  of  England  public  sector  Debt  summary  tables9)    

                                                                                                               8  http://www.bankofengland.co.uk/markets/Pages/apf/default.aspx    9http://www.bankofengland.co.uk/boeapps/iadb/index.asp?Travel=NIxSTxTDx&levels=1&C=JS1&FullPage=&FullPageHistory=&Nodes=X42705X42886X42888X42898X42899X42900X45929X45942X47447&SectionRequired=D&HideNums=-‐1&ExtraInfo=false&G0Xtop.x=48&G0Xtop.y=7

 

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Since   January   2008,   the   bank   has   increased   its   spending   from   £2561million   to  £371784million.  It  is  also  evident  that  quantitative  easing  has  been  done  periodically  not  continuously.     Initially   the  bank  of  England  of  England’s  goal  was  to  spend  £75  billion   over   3   months.   However   the   MPC   authorised   the   purchase   of   £200billion  between  March  and  November  2009.  This  was   subsequently   followed  by  a   further  £75billion   in  October   2011   and   an   additional   £50billion   in   both   February   and   July  2012,   bringing   the   total   to   £375  billion10.   This   highlights   one  of   the  main  negative  factors   of   quantitative   easing,   that   it   cannot   be   planned,   but   rather   suffers   from  implementation  lag.  However,  even  after  all  these  injections  of  funds,  policy  makers  have  to  contend  with  impact  lag,  the  delay  between  the  time  a  policy  is  introduced  until   that   policy   impacts   the   economy.   Not   until   the   3rd   quarter   of   2012   have  we  seen   a   growth   in   the   economy,   showing   that   quantitative   easing   has   worked   but  over  a  longer  time  than  initially  expected.      The   table   below   shows   the   outstanding   stock   of   holdings   for   each   facility   and  identifies   how   the  purchases  were   funded.   This   data  was   captured   at   the   close  of  Thursday  25  October  2012.11    Stock  of  holding  is  on  a  settled  basis,  net  of  any  redemption.    TYPE  OF  SECURITY  PURCHASED   ISSUE  OF  GILTS  &  DMO'S  CASH  

MANAGEMENT  OPERATIONS  CREATION  OF  CENTRAL  BANK  RESERVES  

Gilts   N/A   £371,749,000.00  

Corporate  Bonds   £19,000,000.00   £35,000,000.00  

Secured  Commercial  Paper  

£0.00   £0.00  

 Using  the  information  above,  it  is  evident  that  the  Bank  of  England  is  mainly  funding  quantitative  easing  through  the  creation  of  central  bank  reserves.  The  graph  below  shows  the  comparison  of  gilt  holdings  between  the  recession  and  the  1990’s.  The  gilt  holding  of   banks,   building   societies   and  non-‐bank   institutions   and   individuals   have  decreased   whilst,   the   gilt   holdings   of   the   Bank   of   England   have   increased  significantly.      Conclusion  To  summarise,  quantitative  easing  has  both  its  pros  and  cons.  Quantitative  easing  is  a  reaction  to  a  poor  economy  with  sporadic  injections  of  money;  it  is  understandable  how   the   inflation   rate   took   longer   to   adjust,   as   it   was   not   a   natural   increase   of  money   supply.   Quantitative   easing   was   only   applied   in   the   UK   when   decreasing  interest   rates   no   longer   had   an   effect   on   AD,   in   effect   creating   a   liquidity   trap.  Quantitative  easing  helped  stimulate  the  British  economy  by  injecting  money  directly  where   it   was   needed,   which   in   this   case   were   the   banks   in   crises.   However  quantitative   easing   significantly   increased   inflation,   as   well   as   adversely   affected  annuities   such   as   pensions   because   it   reduces   assets   yields.   Nonetheless   without  

                                                                                                               10  http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx    11  http://www.bankofengland.co.uk/markets/Pages/apf/default.aspx

 

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quantitative   easing   there   is   no   telling   how   bad   the   recession   could   have   been.  Moreover,   there   could   be  more   quantitative   easing   to   stimulate   the  UK’s   sluggish  growth.  Sir  Mervyn  King  has  gone  on  record  to  say  "The  immediate  economic  outlook  remains   a   challenging   one.   Growth   is   likely   to   remain   sluggish   and  inflation  above  target.   The   road   to   recovery   will   be   long   and  winding."12  (Elliott,   Bank   of   England  hints  at  quantitative  easing  as  growth  falters  again,  2012)  King   also   expressed   there   was   a   limit   to   the   bank’s   capability   of   stimulating   the  economy  unless  the  international  environment  improved,  though  he  would  not  rule  out  any  fresh  purchases  of  government  bonds.  Therefore  quantitative  easing  can  be  seen  as  a   temporary  solution   for  stimulating  the  economy,  with   long-‐term  stability  and  recovery  depends  on  other  factors  that  help  growth.    

                                                                                                               12  http://www.guardian.co.uk/business/2012/nov/14/bank-‐of-‐england-‐quantitative-‐easing-‐growth    

 

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http://www.bankofengland.co.uk/markets/Pages/apf/default.aspx  Bank  of  England.  (2011).  Quantitative  Easing  Explained.  Retrieved  from  

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Elliott,  L.  (2012,  November  14).  Bank  of  England  hints  at  quantitative  easing  as  growth  falters  again.  Retrieved  from  The  Guardian:  http://www.guardian.co.uk/business/2012/nov/14/bank-‐of-‐england-‐quantitative-‐easing-‐growth    

Elliott,  L.  (2012,  March  8).  Low  interest  rates  and  QE:  the  winners  and  losers.  Retrieved  from  The  Guardian:  http://www.guardian.co.uk/business/2012/mar/08/low-‐interest-‐rates-‐qe-‐winners-‐losers    

Flanders,  S.  (2012,  July  17  ).  UK  inflation  rate  falls  to  2.4%  in  June.  Retrieved  from  BBC  News:  http://www.bbc.co.uk/news/business-‐18867248    

Insley,  J.  (2012,  July  5).  Quantitative  easing:  its  effect  on  annuities,  pensions  and  inflation.  Retrieved  from  The  Guardian:  http://www.guardian.co.uk/money/2012/jul/05/quantitative-‐easing-‐affect-‐annuities-‐pensions-‐inflation