BoE posts £5.5bn loss on QE book

The Bank of England has made a £5.5bn full-year loss on the assets bought under its quantitative easing (QE) programme to prop up the battered UK economy.

It bought £200bn of gilts, corporate bonds and commercial paper between February 2009 and February 2010 to inject further monetary stimulus after slashing rates to 0.5%, the Telegraph reports.

However, its first annual report revealed the portfolio value has shrunk by £5.5bn. Gilts accounted for the entire fall, with the £198.3bn book valued at £192.8bn on 28 February.

After the £3.8bn of interest paid on the bonds, the nominal loss to the taxpayer is £1.75bn.

But since February, gilt values have improved due to the Chancellor's Budget actions and analysts say the fund is now likely to be in profit.

According to Ray Barrell, senior research fellow at the National Institute of Economic and Social Research, quantitative easing has had a positive impact on the economy.

It has lifted equity and house prices by around 10% and added about 0.5% growth to GDP in both 2009 and 2010.

The Bank bought £1.5bn of corporate bonds under the QE programme to help businesses that are struggling to raise cash.

In another sign confidence is returning, corporate bond investors did not ask the Bank to buy a single bond on Tuesday for the first time since March 9.

This turnaround in sentiment was attributed to the positive earnings season and an improvement in economic data.