The MPC has set out forward guidance that it does not intend to tighten monetary policy at least until there is clear evidence of significant progress being made in eliminating spare capacity and achieving the 2% inflation target sustainably. As time passes and the economy recovers the forward guidance will become more salient, providing reassurance that there is a high bar to any future tightening. Figure 9: February 2021 Monetary Policy Report GDP projection, based on market interest rate expectations £ bn, 2018 prices 640 Projection  620 600  580 ONS data  560 540 520 500 480 460  440 420 2016  2017  2018  2019  2020  2021  2022  2023  400 2024  Source: February 2021 Monetary Policy Report. Conclusion  In conclusion, my view as I have set out in this third Peter Sinclair Town Hall lecture, is that QE is a policy tool that has worked: it has proved its worth in the policy response to the Global Financial Crisis and more recently in the response to the ongoing Covid crisis. Over the past twelve years, QE has meant an expanded role for the central bank balance sheet as a key feature of what Peter termed “the new normal” for monetary policy. Of course, public scrutiny and debate about the role of QE is also valid – it is a relatively new tool about which we still have much to learn.
Figure 2: Bank of England QE programmes and selected policy interventions since 2009  Taken from the IEO’s report on its evaluation of QE. Figure 3: Bank of England balance sheet as a % of GDP  Source: Bank of England, available here. Dotted line extends series to end-2021, assuming completion of current asset purchase programme. All figures shown as a % of lagged GDP except 2021 figure which uses 2019 GDP to avoid distortions from the temporary Covid-related falls in 2020. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  The headline numbers involved in those five interventions detailed in Figure 2 have been very large: in total once the current programme comes to an end the Bank will have purchased £ of government bonds and £ of corporate bonds – that is roughly 40% of annual (pre-Covid) UK GDP. Once that programme is complete the Bank’s balance sheet, which already stands at around 40% of GDP, will be approaching £ or 50% of GDP in size – an unprecedented figure in the Bank’s 327 year history (Figure 3). The robust operationalisation of those QE purchases has been crucial to the Bank’s mission over the past twelve years.