View more on these topics

Debt Management Office warns more QE could dent UK recovery

The head of the Debt Management Office has warned that another round of quantitative easing could damage a recovery in the UK by pushing up the cost of Government borrowing.

DMO chief executive Robert Stheeman says the firm is watching the £325bn quantitative easing programme “incredibly carefully” amid fears that the size of the programme is set to distort prices in the gilts market.

The Bank of England has bought almost a third of gilts in issue, reducing the tradeable supply and potentially impacting on investor interest.

Stheeman conceded that QE could push up the cost of government debt, pointing to instances that have already seen liquidity affected. The DMO must raise £168bn in 2012 in order to fund the deficit as well as help finance public services. The Office for Budget Responsibility has estimated that £900m would be added to debt costs by 2015 if we saw an increase in gilt yields of just 0.1%.

Speaking to The Telegraph, Stheeman says: “As long as the gilts market remains liquid and efficient, and is able to take down our supply with the minimum amount of disruption to the price formation mechanism, I am happy. If we see signs that liquidity in the market is being seriously affected by the Bank’s purchases, of course we would talk to the Bank. We watch their operations incredibly carefully. But so far so good.”

The BoE has estimated that the original £200bn of QE cut gilt yields by about one percentage point and the chancellor has claimed the low rates are saving “this government a total of £36bn compared to its predecessor”.

A number of economists are concerned about the continued gilt purchases with two members of the Monetary Policy Committee urging the governor to look at buying other assets.


Angela Knight decides to call it a day at BBA

After five years at the British Bankers’ Association, chief executive Angela Knight has announced her intention to step down. She will leave in the summer, by which time it is hoped her successor will have been found. Knight says: “I have been at the BBA at a time of extraordinary difficulty and during a crisis […]

U-turn on advice would need new consultation

If the Financial Services Authority were to do a U-turn on its proposals for non-advised sales it would have to consult the industry again, says the Association of Mortgage Intermediaries.

How to use wills to protect your clients’ wishes

March was Free Wills Month! Free Wills Month brings together a group of well-respected charities to offer members of the public aged 55 and over the opportunity to have their simple wills written or updated free of charge by using participating solicitors in selected locations around England and Wales. Research by the Law Society* highlighted that only 64 […]


News and expert analysis straight to your inbox

Sign up