Lady Mulls QE Exit / The 1% Club
In a move that would be at odds with the US Federal Reserve, the Old Lady is contemplating the sale of its entire portfolio of UK government bonds acquired through quantitative easing to bolster its readiness for any future economic downturns. Dave Ramsden, the BOE Deputy Governor, who oversees financial markets, said officials may continue running down the QE portfolio, which peaked at nearly GBP900bn, even after hitting the preferred minimum range of reserves.
Ramsden said that the Bank of England's preferred minimum range of reserves is estimated to be between GBP335bn and GBP495bn. However, the central bank could choose to run the QE program all the way down to zero and use different liquidity instruments to meet commercial banks’ financial stability demand for reserves.
“The Monetary Policy Committee could unwind the APF fully, if it judged necessary for policy reasons, and the level of the PMRR should not affect this judgment,” Ramsden said, adding, “Our approach differs from other central banks, notably the Federal Reserve, which aims to maintain its QE portfolio at a level that will back an ‘ample’ level of reserves.”
QE also presents a political challenge for the bank, due to the arrangement that taxpayers bear the brunt of any losses from the portfolio, as per the indemnity agreement established at the program's inception in 2009. Initially, the program generated a profit of GBP124Bn, which, of course, the UK government spent without a thought for a rainy day.
However, since October 2022, the program has incurred losses of over GBP49bn, which will be paid by the state. The total loss could reach close to GBP100bn over the lifetime of QE, the BOE has warned.
Also, it has been reported that breaking into the top 1% of wealthiest people in the US is getting harder. To break into the exclusive club, you now need a minimum of $5.8m, 15% more than just a year ago. Monaco retains its spot for the highest threshold into the club at $12.8m, a 3.2% rise from last year. Behind Monaco, you have Luxembourg, $10.8m, and Switzerland, $8.5m.
Here in the UK, accumulate wealth of just over $3m and you’re in!
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