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BoE Deputy Governor Denies QE Role in Inflation Surge

Bank of England (BoE) Deputy Governor Ben Broadbent stated that while central banks should not ignore money supply measures, there is no substantial evidence to support the claim that their quantitative easing (QE) bond-buying programs have caused excessive inflation.

Ben Broadbent, Bank of England Governor
Ben Broadbent, Bank of England Governor

Rising Inflation Blamed on Central Banks

Numerous politicians and analysts have attributed the recent inflation surge to the vast amounts of money created by the BoE and other central banks since the 2008 financial crisis and throughout the COVID-19 pandemic.

UK Inflation Reaches 40-Year High

In October, British consumer price inflation reached its highest point in over 40 years at 11.1%, with the most recent data for March maintaining rates above 10%.

Pandemic and Geopolitics as Key Factors

According to Broadbent, the recent inflation increase is more likely due to supply chain disruptions caused by the pandemic and the surge in natural gas prices following Russia's invasion of Ukraine in 2022 rather than money supply.

Economists Criticize Central Banks

Some economists have accused the BoE, U.S. Federal Reserve, and European Central Bank of overlooking warning signs from increased money supply indicating a rising inflation risk.

Money Supply Contextualization

Broadbent emphasizes that the BoE does not disregard the money supply but stresses the importance of considering it in context with other economic variables. He also differentiates between quantitative easing and the "helicopter drop" of money in economic texts.

Broadbent concludes that evidence does not support the strongest claims suggesting QE inevitably leads to excessive inflation.