Why quantitative easing won’t work

Now it has virtually nowhere left to go with interest rates, the Bank of England has started on the next phase of its great monetary experiment – quantitative easing. John Stepek explains what it is and why it's a futile exercise.

Interest rates were already at a record low. Now they really can't go much lower. The Bank of England cut the bank rate in half today, with another half-point cut to 0.5%.

One of the many pundits currently clogging up my email inbox with comments on the cut says that it will "actively encourage business and consumer confidence." I think this is a bit of a leap. Interest rates can't go much lower. The only other country that's ever had 0% interest rates in recent decades is Japan, and it's been practically impossible to make money there ever since. That doesn't inspire confidence in me.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.