UK Govt transferred over 14bn GBP to the BoE, largest transfer ever, to cover QE losses

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.

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.

This article was written by Eamonn Sheridan at Source