Bank of England Says QE Gains Offset Huge Losses

The Bank of England (BoE) has revealed that the wider benefits of its government bond purchases, known as quantitative easing (QE), have largely offset the huge financial losses now showing up on its balance sheet.

According to updated estimates released on Tuesday, the BoE expects net lifetime losses from QE to range between £60 billion and £120 billion, depending on how future interest rates evolve. The estimate has slightly increased since August, when the central bank projected losses of £55 billion to £115 billion.

QE was launched in 2009, in the aftermath of the global financial crisis, and later expanded during the COVID-19 pandemic, pushing total gilt holdings to a record £875 billion. The policy involved buying government bonds to inject money into the economy and lower borrowing costs — a move that helped stabilize markets but is now costing the government heavily as interest rates have risen sharply.

However, the BoE’s latest analysis suggests the story isn’t all bleak. The program also allowed the government to issue debt more cheaply, saving between £50 billion and £125 billion in borrowing costs. These fiscal benefits, according to the bank, nearly offset the direct costs of the QE program.

As the BoE now unwinds those holdings through quantitative tightening (QT) — selling bonds and letting others mature — the losses are becoming more visible. Yet, officials argue this process is necessary to rebuild flexibility for future economic shocks.

While critics have called for changes to how the BoE pays interest to banks holding reserves, the central bank has maintained that its approach is vital for effective monetary policy.

For now, the message from Threadneedle Street is clear: despite heavy short-term losses, QE’s long-term benefits may have kept Britain’s public finances steadier than many feared.