Although the aim of the US Federal Reserve’s quantitative easing (QE) programmes were to lower long term interest rates in the US and so boost economic growth there, the study revealed spillover effects which helped lower interest rates in the UK, too.
“US policy surprises also lowered UK, Canadian and German government bond yields by one third to one half of the corresponding change in US Treasury yields,” the study found.
The Fed’s QE amounted to $600bn (£376.2bn) between November 2010 and June 2011, and lowered the interest rates on US Treasuries by 15 basis points, according to economist Jonathan Wright, whose research was used in the Bank’s quarterly stats.
That suggests the British government saw its lending costs fall by between five and 7.5 basis points. Corporate yields in the US fell around 10 basis points, Wright believes, and so UK firms also saw interest rates fall.