The central banker’s new clothes

Admitting that central banks are now agents of treasuries would destroy the intellectual edifice of current macroeconomic theory.

Since March 2020, the Bank of England (BOE) has bought £450 billion ($639 billion) of UK government debt through its so-called Asset Purchase Facility. Virtually all of this was new debt issued by the government since the start of the Covid-19 crisis. The BOE’s purchases look like a thinly veiled attempt to use quantitative easing (QE) to finance the government’s deficit and ensure low borrowing costs. Is this still monetary policy, or is the central bank conducting fiscal policy by the back door?