BoE QE losses unlikely to lead to a big fiscal tightening

We doubt the Bank of England’s cumulative net loss from its quantitative easing programme will be a big as the £150bn estimated by the Bank earlier this week. That’s because we don’t think interest rates will rise as far as the Bank has assumed. Either way, these losses are unlikely to lead to a big tightening in fiscal policy. What matters for the Chancellor’s “fiscal mandate” is that underlying debt as a share of GDP is falling in five years’ time (currently 2027-28 compared to 2026-27). As such, it’s the change between those years that really matters, not the level of debt.