It is of course, extremely difficult to know what would have happened in the absence of the asset purchase programme; not least because Bank Rate was at a record low and because other, major central banks also loosened policy sharply. There might never be agreement on a precise quantification of its effects but my own view is that the asset purchase programme was extremely successful in meeting its immediate objectives. 4 In particular I would pick out the following points which were all consistent with the various channels through which QE can work:   Broad money growth, although anaemic, did not fall by as much as should have been expected given previous contractions in nominal GDP growth (Chart 1);    Analysis by some of my colleagues 5 suggests that asset purchases may have lowered long term interest rates on gilts at 5–25 years maturity by around 100 Basis points relative to what would otherwise have been the case;    Demand for risky assets increased: spreads on corporate bonds fell markedly, and issuance of both corporate bonds and equities picked up to record rates in 2009 (Chart 2 and Table 1);    Inter-bank borrowing rates fell back sharply, most likely because significant increases in commercial bank reserves reduced the need for banks to borrow from each other in the inter-bank market. For example, three-month sterling LIBOR 6 rates fell from over 2% in late 2008 to under 1% during the course of 2009 (Chart 3).
2 While the form of this policy was “unconventional”, the ultimate goal was identical to any normal reduction in Bank Rate – namely to stimulate nominal demand in the economy, and hence help the MPC achieve its remit of targeting 2% CPI inflation. The UK was not alone in adopting unconventional measures. Both the Federal Reserve Board in the United States, and the European Central Bank undertook a range of alternative measures too. Although the precise nature of the  1  In the central bank community, asset purchases are known as an example of an “unconventional” monetary policy. 2  See Fisher (2010) “The corporate sector and the Bank of England’s Asset Purchases” available at http://www.bankofengland.co.uk/publications/speeches/2010/speech423.pdf . BIS Review 135/2010  1  programmes differed from country to country, all three central banks saw their balance sheets expand, funded by an increase in commercial bank reserves. 3 At the time we started the asset purchases, it was far from clear how successful the policy would be. None of those involved had ever personally experienced a financial crisis as big as this, nor a recession so deep. And no one had direct experience of conducting a major asset purchase programme in the UK. In the press and amongst other economic commentators there was a lot of scepticism expressed about the likely efficacy of the policy.