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ALEX BRUMMER: Calling a halt to QE might be a case for a small hurrah


Bailey ends loose money: Calling a halt to QE and unwinding might be a case for a small hurrah, says ALEX BRUMMER


Nothing is more important to consumers than mortgage rates. 

Property prices are a constant source of intrigue, pride and speculation and, for most, it will be the talking point after the rise in bank rate to 0.5 per cent.

The Bank of England may be the first out of the G7 traps on raising the cost of borrowing, but all the signs are that the European Central Bank, after a change of heart, won’t be far behind.

Making money: Under the stewardship of governor Andrew Bailey (pictured), the Bank’s asset purchases doubled in the pandemic from £445bn to £895bn

It is hard to imagine that quantitative easing, the process by which the Bank uses its balance sheet to buy government bonds, is high on the agenda at the Pig & Whistle.

Indeed, a report for the Bank’s Court published in 2021 found the Old Lady had done a poor job in communicating how the asset purchase programme works.

That has not stopped successive governors – Lord King, Mark Carney and most recently Andrew Bailey – deploying the tool. Under Bailey’s stewardship, the Bank’s asset purchases doubled in the pandemic from £445billion to £895billion, including the purchase of £20billion of corporate bonds.

Members of the Bank’s interest rate setting Monetary Policy Committee found it hard to agree on whether the immediate rise in interest rates was to be one-quarter or half-of-a percentage point. They were unanimous on turning off the printing presses.

Fears among early critics that QE would unleash Zimbabwe-style inflation are so far unproven. 

Monetarist economists do believe that it has contributed to higher prices and are particularly fierce when it comes to the 35 per cent jump in broad money in the US under the stewardship of Fed chairman Jay Powell. 

The ground-breaking stuff at the February gathering of the MPC was an unscheduled decision to sell off the Bank’s holdings of £20billion of corporate debt.

It has also followed through with its resolve to cease buying new government securities to replace those that mature. That potentially could be a problem for Robert Stheeman at the Debt Management Office who has dealt with Whitehall’s borrowing boom in the pandemic.

The Bank also indicates that once interest rates hit 1 per cent, it could become much more active in shrinking its holdings of gilts.

Economic consensus is that QE saved the UK from disaster during the financial crisis, and at the start of the pandemic in March 2020, when money markets on both sides of the Atlantic were in meltdown. 

A consequence has been some 14 years of hurt for savers. QE suppressed annuity rates for pensioners and returns on deposits.

Calling a halt to QE and unwinding might be a case for a small hurrah. That’s until the next bolt from the blue comes along.

Sporting life

BT’s venture in sports broadcasting, a product of the ambition of former chief executive Gavin Patterson, is an expensive distraction. It gobbled up some £400million a year – money which would have been much more wisely spent on the roll-out of fast-fibre to the door.

Early justification for BT Sport was that it would encourage landline customers to sign up for broadband. 

It became one of the most superfluous marketing schemes in history. Consumers buy broadband on the basis of speed, reliability of service and competitive prices.

The decision of current boss Philip Jansen to call time on sport looked sensible enough. When presented with the chance to hang on rather than a clean exit, Jansen decided to get into bed with Discovery in a 50/50 joint venture. That could be seen as a stepping stone to a full departure.

However, given the way the telecoms market is moving it could be good sense.

It may not release the cash that Jansen had hoped for, but follows the pattern in the US where AT&T felt it needed to move beyond pipes by buying Time Warner. 

A combination of BT Sport and Discovery-owned Eurosport could be powerful and gives BT a hand on the Paris Olympics in 2024. It must never become a diversion from laying fibre.

Payback time

Is there a lesson for share platform Hargreaves Lansdown?

Swiss fund manager GAM is returning to investors 100 per cent of their investment in its fund that heavily invested in supply finance contracts written by collapsed UK group Greensill. 

Maybe Hargreaves Lansdown should be doing the same for the 300,000 or so investors which it so haplessly exposed to Neil Woodford. 

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