The Bank of England has published a staff working paper that finds the effects of quantitative easing and quantitative tightening in the United Kingdom are state contingent, meaning their impact changes across episodes rather than following a stable recurring pattern. Using 60 years of UK data on public sector debt sales to the banking system, the authors identify a novel bank funding shock and conclude that the transmission of unconventional monetary policy varies with the policy framework, financial market structure and conditions in the real economy. The paper finds that, across successive rounds of QE, the response of government bond yields to a given amount of asset purchases declines. At the same time, demand becomes more responsive to yield changes, while inflation becomes more persistent and more sensitive to the output gap. The research also reports that the unanticipated component of QE and QT appears to account for only a relatively small share of the total impact. The Bank notes that staff working papers describe research in progress published to encourage comment and debate, and that the views expressed are those of the authors rather than Bank of England policy.
Bank of England2026-05-29
Bank of England publishes research finding quantitative easing and tightening effects are state contingent across 60 years of UK data
The Bank of England has published a staff working paper finding that the effects of quantitative easing and tightening in the United Kingdom are state contingent, with transmission varying by policy framework, financial market structure and real-economy conditions. The paper reports that, over successive rounds of quantitative easing, the impact of a given volume of asset purchases on government bond yields declines, demand becomes more responsive to yield changes, inflation becomes more persistent and more sensitive to the output gap, and that the unanticipated component of these policies accounts for only a relatively small share of their total impact.