# BoE’s Broadbent says QE not to blame for surge in inflation
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: BoE's Broadbent: QE not to blame for surge in inflation
Meta Description: Bank of England Deputy Governor disagrees that quantitative easing led to recent spike in prices, citing supply chain issues and energy costs as major
URL: https://financedigest.com/boes-broadbent-says-qe-not-to-blame-for-surge-in-inflationhtml

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# BoE’s Broadbent says QE not to blame for surge in inflation

LONDON (Reuters) -Bank of England (BoE) Deputy Governor Ben Broadbent said central banks should not ignore measures of money supply but claims that their quantitative easing (QE) bond-buying programmes led to excessive inflation are not backed up by evidence.

Some politicians and analysts have blamed the huge sums of central bank money created by the BoE and other central banks since the 2008 financial crisis, and more recently during the COVID-19 pandemic, for the recent surge in inflation.

British consumer price inflation hit its highest in more than 40 years in October at 11.1%, and remained above 10% in the most recent data for March.

Broadbent – in line with recent BoE statements – said supply-chain disruptions caused by the pandemic and the surge in natural gas [prices after Russia’s invasion of Ukraine in 2022 were clearer causes of the jump in prices than money supply](https://www.financedigest.com/oil-prices-steady-on-uncertain-global-outlook-and-supply-concerns.html "Oil prices steady on uncertain global outlook and supply concerns").

As an explanation for the inflation we’ve experienced I think this fits the actual data better than the single fact of [strong household money growth](https://www.financedigest.com/lego-posts-strong-growth-on-robust-demand-new-store-openings.html "Lego posts strong growth on robust demand, new store openings") during the pandemic,” he said in a speech on Tuesday to the National Institute of Economic and Social Research, a think tank.

Some economists have accused the BoE, U.S. Federal Reserve and the European [Central Bank](https://www.financedigest.com/climate-change-fight-a-core-duty-for-central-banks-ecbs-villeroy.html "Climate change fight a ‘core duty’ for central banks – ECB’s Villeroy") of missing signals from an increase in money supply that should have served as warnings of the risk of rising inflation.

In major economic areas, money [supply growth](https://www.financedigest.com/car-bulb-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2028.html "Car Bulb Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2028") was running at rates which would have set the alarm bells ringing not many years earlier. But somehow [central banks](https://www.financedigest.com/polish-central-bank-holds-rates-points-to-slowdown-ahead.html "Polish central bank holds rates, points to slowdown ahead") thought that this did not matter,” Roger Bootle, the chairman of consultancy Capital Economics, wrote in the Telegraph newspaper on Sunday

Broadbent said the BoE did not ignore [money supply, but said it needed to be kept in context with other economic](https://www.financedigest.com/mobile-money-could-pave-way-for-economic-stability-in-emerging-economies-but-only-if-banks-can-collaborate-on-services.html "Mobile money could pave way for economic stability in emerging economies – but only if banks can collaborate on services") variables, and that quantitative easing in practice was different to the ‘helicopter drop’ of money found in economic text books.

No monetary policymaker should ignore [information that’s relevant for future](https://www.financedigest.com/the-radiology-information-systems-market-shall-be-growing-unabatedly-in-the-future.html "The Radiology Information Systems Market shall be growing unabatedly in the future") inflation. That includes the monetary aggregates,” he said.

But like most economic [data they need](https://www.financedigest.com/three-reasons-finance-professionals-need-get-grips-big-data.html "Three reasons why finance professionals need to get to grips with big data") interpretation. Certainly the very strongest claims – that QE inevitably leads to rapid growth of commercial bank deposits (M4), on a par with that in the [central bank’s](https://www.financedigest.com/russian-central-bank-gives-legal-entities-green-light-to-trade-foreign-shares.html "Russian central bank gives legal entities green light to trade foreign shares") balance sheet, and that this, in turn, inevitably leads to excessive inflation – are not well supported by the evidence.

(Reporting by David Milliken and Andy BruceEditing by William Schomberg)


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