BoE Chief Says Asset Purchases To Be Reversed Before Hiking Rates
Bank of England Governor Andrew Bailey said the bank should adjust its quantitative easing programme before starting to lift interest rates.
The central bank reserves cannot be taken for granted, Bailey wrote in an article published on Bloomberg.
“When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on a sustained basis,” he said.
“Elevated balance sheets could limit the room for maneuver in future emergencies,” Bailey said.
Bailey said he did not want high central bank holdings of government debt to become a permanent feature. The financial system must not become reliant on these extraordinary levels of reserves.
Last week, the central bank raised its QE by GBP 100 billion to GBP 745 billion. The bank had reduced the benchmark rate to a historic low of 0.1 percent in March.