A quantitative easing?
The UK has begun a programme of quantitative easing by authorising the Bank of England to acquire £75bn of previously issued government debt
Although all investors can participate in the deals it is expected that most of the sales will be from the banks. By buying this debt the Bank of England effectively pushes huge amounts of liquidity into the economy with the hope that over time the banks recycle it into loans for needy companies and individuals.
The programme should also help to push down long term interest rates which have not declined in line with base rates. Quantitative easing is an extreme and very unusual strategy designed to stave off an economic depression rather than moderate a conventional recession. It is a clear sign of the government’s deep concern over the domestic economic predicament.
Charities should plan for a downturn which is deeper and longer lasting than any in their experience, it is likely that conditions will deteriorate further in the next few months.
Author: John Kelly
John Kelly is head of client investment at CCLA.
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