The UK Treasury sent over 14.3bn GBP to the Bank of England in July, which is the biggest state transfer on record, to cover losses on the Bank’s QE steps
- transfers have totalled more than 30 bn GBP in the past 11 months
Numbers come from the UK’s Office for National Statistics.
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As part of its QE program the BoE bought UK government bonds with £875 billion it created between 2009 and 2021
- those gilts pay a fixed interest rate to the bank
- the money it created (“central bank reserves”) is held by commercial banks and earns interest at the bank’s main rate
- When interest rates were below 2%, the QE program was profitable for the bank, which transferred the gains backs to the government. With the BOE’s key rate at 5.25%, the program is now deeply in losses with net payments now being made to the commercial banks.
Info comes via a Bloomberg report, gated.