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which hit the financial sector very hard, with the idea being to support the wider economy by making sure there was plenty of money available to banks and enterprises at low interest rates. The Bank ran the programme again in 2012 and 2016, and then again, on a huge scale, as Covid-19 hit the British economy in early 2020. QE works by relying on many large financial institutions (especially commercial banks) holding their own accounts with the Bank of England, which they use as their “reserves” - something like their own emergency savings accounts. When the Bank of England operates its QE programme, it puts more electronic money into these reserve accounts. In return, the Bank of England takes financial assets from those financial institutions worth the same amount. In simple terms, the Bank of England buys bonds (mostly public but also private) from banks and beefs up the accounts the banks hold with it. The outcome is to introduce a huge amount of newly created money into the financial system. This was £200bn by the end of 2009, with smaller increases over the rest of the decade. But by the end of 2020 the total amount of new money pumped into the financial system was £895bn, as the graph below shows.

Amount of Quantitative Easing, Bank of England purchases of bonds in £billion

 Source: Bank of England

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