UK £50bn better off thanks to quantitative easing, says economist

Britain's economy is £50bn better off as a result of the Bank of England's decision to pump in money in the wake of the global financial meltdown, one of its most senior economists has argued.

The Bank's £375bn quantitative easing programme (QE) has had a bigger impact on gross domestic product than initially thought, according to Martin Weale, adding about 3% or £50bn to the overall level of GDP since it was first introduced in March 2009. Total UK GDP was about £1.6tn in 2013.

Weale, a member of the Bank's interest rate-setting monetary policy committee (MPC), also suggested QE has had a bigger impact on inflation than first thought, with the first phase of the scheme adding about 4.2% to overall inflation.

"Overall, these findings are encouraging, because they suggest that unconventional monetary policy in form of asset purchases can be effective in stabilising output and prices," said Weale, in a paper co-authored with his Bank colleague Tomasz Wieladek.

The authors said that QE also had a role to play in dampening stock market volatility by reducing uncertainty, and could trigger a rise in house prices as a result of lower mortgage rates.

The Bank introduced QE, focused on buying government debt in the secondary market, as it stepped up its response to the global crisis which had intensified with the collapse of US investment bank Lehman Brothers in September 2008.

At the same time it lowered the main interest to an all-time low of 0.5%, where it remains today.