BoE working paper questions state-contingent QE/QT effects

Bank of England published a staff working paper examining whether the effects of quantitative easing and tightening are state contingent.

The paper explores whether QE/QT impacts vary with market conditions, with implications for gilt liquidity, term premia, and bank reserve dynamics during ongoing BoE balance sheet reduction. Findings may influence future APF unwind pacing and market functioning expectations.

QT pacing assumptions drive gilt market liquidity, collateral, and reserve scarcity risks for UK-active banks.

Research signals BoE thinking on QT calibration, materially relevant to rates desks and treasury functions.

“Bank of England staff working paper sets out research in progress on whether QE and QT effects are state contingent, aimed at encouraging comments and debate.”