A The Bank of England has printed £375bn to buy government bonds (quantitative easing or QE). These bonds pay interest to the Bank. As the Treasury indemnifies the Bank against losses on QE, it also claims the profits. It will take £35bn over the coming months. This will be done quarterly from now on.
Q Is this normal?
A It has never been done before in the UK, and has led to speculation the government is being bailed out of a tight spot by the Bank. But the US and Japan do the same.
Q Is this a bailout for the government?
A The government was expected to admit to missing its deficit targets in just a few weeks’ time. But the governor claims there is nothing untoward about this timing. If the QE facility loses money in future, as is likely, the Treasury will bail out the Bank, reversing this transfer.
Q Is this another round of QE?
A It cuts public borrowing, and so gilts in circulation, by £35bn, so yes – even though the MPC did not vote for it. Sir Mervyn says he will reduce future QE to compensate.