The pound, along with Britain’s fiscal retrenchment, are often cited as explanations for why yields on UK government debt now hover around record lows.
Some suggest another factor is at play: financial repression.
This sinister-sounding phrase describes the situation where government policy attempts to artificially lower interest rates with the specific aim of reducing their debt burden. Given that QE has done much to lower yields on UK government debt, some have tagged the policy with the financial repression label.
Regardless of whether or not this is the case (more on which later), Fathom, a consulting group made up of former Bank economists, today expressed doubts about whether such a policy – and for that matter gilt purchases – will do much to aid the UK recovery. Read more