Fear of the unknown behind QE concerns

Generali

Radiantsoul wrote: »

Perhaps, but at the moment the government is only buying medium dated gilts. It does depend on the asset classes, but the current plan seems to be to buy safe assets from pension funds. Riskier assets would be problematic as they would increase the default risk of the BoE and probably have a bad effect on borrowing costs for the national debt.

Perfectly reasonable points - if the cash is just sitting on the balance sheet of the Bank of England as Gilts are sold back then that isn't inflationary.

Presumably as the economy normalises, the yield on Gilts will rise and so the Bank of England won't be able to sterilise the money printed to buy these Gilts without selling more Gilts - in effect the cost of providing this QE in a reasonable fashion will be an increase in the real national debt.