Leverhulme Project: Quantitative Easing and how central banks depoliticised monetary policy

In this project, paper forthcoming with Jose Tomas Labarca (Cambridge University), we examined why the Bank of England shifted its macroeconomic strategy during the Global Financial Crisis--from supporting fiscal stimulus and monetary easing to endorsing fiscal austerity alongside an increasingly expansive programme of Quantitative Easing (QE). While early Monetary Policy Committee (MPC) statements aligned with New Keynesian arguments for counter-cyclical fiscal expansion at the zero lower bound, by March 2009 the Bank publicly reversed course.

The article introduces the concept of strategic politicisation management to explain how central bankers adjusted policy in response to mounting public and political scrutiny. Faced with criticism over the risks, fairness, and efficacy of QE, Bank officials feared that such politicisation could undermine the central bank’s legitimacy and independence. In response, they developed three strategies: designing QE to appear consistent with pre-crisis technocratic norms; presenting it as functionally equivalent to conventional rate-setting; and demanding fiscal austerity to reinforce the Bank’s authority and commitment to price stability.

The findings make two key contributions. First, they expand the literature on depoliticisation. The depoliticisation literature has argued that, since the 1980s, governments have increasingly delegated macroeconomic decision-making to technocratic institutions--such as central banks--in order to shield economic policy from democratic contestation and short-term political pressures. Our findings confirm depoliticisation also mattered during the Global Financial Crisis. However, central banks were not just passive recipients of technocratic authority, they actively managed politicisation risks to protect their autonomy. Our article also adds to debates on central bank independence by revealing how communication and policy design--not just formal institutional rules--are central to maintaining credibility. Methodologically, the article draws on over 1,000 pages of archival and public materials to conduct an ‘exceptional case study’ of the Bank’s unique policy trajectory between 2009 and 2012.