Rich have benefited most from quantitative easing

| August 24, 2012 | 0 Comments
Rich have benefited most from quantitative easing

The Bank of England has admitted in a new report that the richest 5 per cent of UK households have benefitted the most from its quantitative easing (QE) programme.

The Bank launched the programme in March 2009, in an effort to revive economic growth.

In total it has bought £375bn of government bonds, known as gilts and this has boosted asset prices across the economy by around 28 per cent according to the Monetary Policy Committee.

Although the programme has led to a fall in the value of pension funds, the Banks says that most people are better off as a result of QE.

The Bank said: “By pushing up a range of asset prices, asset purchases have boosted the value of households’ financial wealth held outside pension funds, although holdings are heavily skewed, with the top 5% of households holding 40% of these assets.

“QE has caused the price of gilts to rise and yields to fall, in turn leading to an increase in demand for, and price of, a wide range of other assets, including corporate bonds and equities.

“That has lowered borrowing costs for companies and households and increased the net wealth of asset holders, both of which have acted to stimulate spending.”

The Bank published the analysis of its QE programme in response to a request by the Treasury Select Committee.

There was a glimmer of good news for the economy today with the latest figures from the Office for National Statistics showing that it contracted by just 0.5 per cent between April in June, rather than 0.7 per cent as previously thought.

The adjustment was due to higher than estimated output in the construction and production sectors.

The extra Bank Holiday in June for the Diamond Jubilee is believed to have reduced growth by 0.5 per cent, so the overall picture for the quarter is that the economy was flat.

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