Document Type

Case Study

Case Series

Market Liquidity Programs

JEL Codes

G01, G28


On March 5, 2009, in the wake of the fallout from the Global Financial Crisis, the Monetary Policy Committee of the Bank of England announced a new, unconventional policy measure: quantitative easing. The MPC determined that simply cutting the Bank Rate in the face of a recession would not be enough to boost spending and increase inflation to meet the Bank’s goal of a 2% CPI-inflation target in the medium term. Rather, over the course of the next year, the Bank purchased £200 billion of assets—primarily gilts—in reverse auctions through a newly created Asset Purchase Program. After just under one year of purchases and a brief hiatus, the Bank revisited the program in 2011 and purchased an additional £175 billion of assets, bringing the total to £375 billion. For the most part, studies hold that these two episodes of purchasing—QE1 and QE2—were successful, as gilt and other asset prices increased and the program had an impact on inflation and GDP. However, it is hard to conclusively assert the impact of QE on the economy, as the unconventional policy was implemented concurrently with other measures in the United Kingdom and around the world.

Date Revised