• Paul Tucker


October 2022, Paper: "There has been growing concern about the effect on the public finances of the government having effectively borrowed at a floating rate of interest, which will increase, possibly sharply, as the Bank of England tries to bring inflation under control. Higher debt-servicing costs would increase government borrowing, and would imply, eventually, some combination of higher taxes and lower spending on public services and other things. This predicament is a complicated product of low equilibrium market interest rates, the authorities’ resorting to quantitative easing (QE) as a substitute for interest rate cuts at the zero lower bound, and central banks paying interest on banks’ reserves. That cocktail of technicalities needs some slow-motion unpacking in order to expose the nature of the problem and the pros and cons of various possible solutions. This chapter aims to do that."