Bean said the QE programme has already cost UK taxpayers £38bn over the last 16 months, and is expected to be as high as £200bn.
In an interview with Bloomberg, Bean said the QE programme has already cost UK taxpayers £38bn over the last 16 months, and is expected to be as high as £200bn, as it is unwound over the next decade.
He argued for the creation of a new, lower interest rate to be paid on a portion of the £895bn of commercial bank deposits created under QE, similar to the European Central Bank's tiering of payments on reserves.
'Untested' quantitative tightening was 'leap in the dark' for Bank of England
Bean, who served as deputy governor between 2008 and 2016, said BoE members have «inflicted substantial costs on the taxpayer without adequate political legitimacy and accountability».
His comments follow a report by the Treasury Committee last week into quantitative tightening (QT), which questioned the fiscal burden of QE, as well as the ‘value for money' for taxpayers, as losses are being indemnified by quarterly transfers from the Treasury.
This is because under QE, the BoE bought £895bn of gilts and bonds between 2009 and 2021 to prop up the economy. By 2022, this resulted in total gains of £124bn, but the central bank has forecast losses of £200bn, £40bn of which this year alone, meaning the lifetime cost of QE could hover around £80bn.
The losses come from the fact that the commercial bank deposits created under QE are paid at the Bank rate, which currently stands at 5.25%, while the BoE earns around 2% on the portfolio of bonds it bought during the programme.
As a result, the central bank only makes a profit if the Bank rate is below 2%; anything above will result in a loss. Any losses will beRead more on investmentweek.co.uk