Education Information

UK monthly infation (CPIH measure), 2000-2022

 Source: ONS and Bank of England

On the other hand, QE has led to some, very specific, price increases. By creating new money and handing it to major financial institutions, the Bank of England has helped push up the price of financial and property assets. This happened because those financial institutions took the newly created money and used it to trade in financial assets (such as shares) and real estate. As a result, share prices and, especially, property prices in Britain were consistently pushed up, even as the rest of the economy suffered during covid. 12 Rising share prices and, even more, rising property prices and rents represent increases in financial wealth. So, while the supply side of the British economy was being run down and in stagnation in the 2010s, and there was the rise of zero hours contracts and the casualised gig economy worsening the incomes of the majority, QE directly contributed to even greater wealth inequality. The worst aspect of it is that, by increasing wealth inequality, QE made it even harder for first-time buyers, especially in the large urban centres, to buy a home.

But there was no obvious link between QE and inflation during the last decade.

The House of Lords Economic A ff airs Select Committee, summarising the evidence on QE and 12 inequality, said that “On balance, the committee found that QE is likely to have exacerbated wealth inequalities in the UK. It said this was because QE’s main e ff ects act to increase the prices of assets, which primarily beneft wealthier households.” House of Lords Economic A ff airs Select Committee, “Quantitative Easing”, 11 November 2021.

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