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Bank of England sees wider QE benefits cushioning big losses
Published by Global Banking & Finance Review®
Posted on November 11, 2025
3 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on November 11, 2025
3 min readLast updated: January 21, 2026
The Bank of England states that QE benefits largely offset its losses, aiding fiscal savings and economic growth despite political concerns.
By Andy Bruce
MANCHESTER, England (Reuters) -The Bank of England said on Tuesday that wider benefits from its past government bond purchases mostly offset the large losses accruing on its quantitative easing portfolio, a hot political issue because the government covers them.
The BoE updated its standard estimate of the net lifetime loss stemming directly from QE to between 60 billion pounds ($80.5 billion) and 120 billion pounds, depending on the future path of interest rates.
In August, it had put this loss at between 55 and 115 billion pounds.
QE ALLOWED CHEAPER DEBT
In a new analysis, the central bank said QE - which was conducted between 2009 and 2021 and is now being reversed - had delivered extra benefits by allowing Britain's government to issue debt more cheaply.
Lower debt issuance costs translated into fiscal savings of between 50 billion pounds and 125 billion pounds, the BoE said, almost fully offsetting the direct costs of QE.
The central bank added that this analysis did not factor in the boost to the economy and tax revenues provided by QE.
"It is likely that the fiscal benefits of QE significantly, or fully, offset the net lifetime transfers from HMT (His Majesty's Treasury) to the APF (BoE Asset Purchase Facility) under the indemnity," Governor Andrew Bailey said in a letter to finance minister Rachel Reeves accompanying the new estimates.
The BoE has previously said the point of QE was to meet its 2% inflation target and it was not intended to help fund the state.
LARGE LOSSES
The BoE's total purchases of British gilts peaked at 875 billion pounds during the COVID-19 pandemic as a way of stimulating the economy, funded by the creation of reserves held by commercial banks on which the BoE pays its standard interest rate.
With rates much higher and bond prices lower than was foreseen at the time of the purchases, the APF is now recording large losses.
The BoE's move to shrink its holdings by selling gilts as well as letting them mature - known as quantitative tightening - has brought some of those losses forward.
BoE officials say they need to reduce gilt holdings to restore firepower against future shocks.
The drain on public finances has prompted calls from some economists and politicians, including the Reform UK party, to reduce or even cease interest payments to banks that hold reserves at the BoE.
Bailey has said this would weaken the effectiveness of monetary policy. Reeves has said she does not plan to change how the BoE pays interest to banks.
($1 = 0.7451 pounds)
(Reporting by Andy Bruce; Editing by Alex Richardson)
Monetary policy is the process by which a central bank manages the money supply and interest rates to achieve macroeconomic objectives such as controlling inflation and stabilizing currency.
Financial stability refers to a condition where the financial system operates effectively, with institutions able to withstand shocks, ensuring the smooth functioning of markets.
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