The Bank of England Balance sheet has been expanding rather quickly recently

Mark Carney, the Governor of the Bank of England gave a speech on Guidance, Contingencies and Brexit at the Society of Professional Economists on the 24th May 2018. Essentially, the speech said the Bank was well prepared for any “potential path” of Brexit. What it didn’t mention was the rapidly expanding balance sheet.

Bank of England Balance Sheet October 2018
Data Source: Bank of England

The Bank of England balance sheet is now some £580 billion or 30% of UK GDP, much lower than 45% of Euro Area GDP for the European Central Bank. And far smaller as a percentage of GDP than the Bank of Japan or the Swiss National Bank. (Related: Here’s how much the balance sheets of the Bank of Japan, the Swiss National Bank, the Federal Reserve and the European Central Bank have grown this century )

The only component that has really grown since the vote to leave the European Union is the Loan to Asset Purchase Facility, effectively Quantitative Easing by another name. Foreign Reserves and Long-term assets aren’t really expanding.

UK QE October 2018
Data Source: Bank of England

Broad Money supply (M4 and M3) isn’t expanding that rapidly which only means one thing – the Bank of England is controlling monetary policy (and money supply) more than ever. At least the Bank of England seems to be prepared for any Brexit.

UK M4 money supply October 2018
Data Source: Bank of England
UK M3 money supply October 2018
Data Source: Bank of England

Our piece on The Real Economics of Brexit is almost ready and will be published over the coming weekend, it is currently too long and is being condensed.

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