Bank of England Wants to Remove the QE Punch Bowl
For a central banker in febrile times, Andrew Bailey is sending out some bold signals on reducing the BOE's balance sheet.
A different message.
Photographer: Chris J. Ratcliffe/BloombergThe Bank of England is taking a risk by highlighting an exit strategy from its pandemic bond-buying program even before the U.K. has emerged from lockdown. If the economy fails to pick up, the bank could be forced into an embarrassing U-turn.
Governor Andrew Bailey indicated in a Bloomberg Opinion article on Monday that he might reduce the BOE’s swollen reserves before hiking interest rates, in what would be a reversal of the course set by his predecessor Mark Carney. This is a double-punch for those expecting an ongoing flood of money. Just last Thursday, the bank’s Monetary Policy Committee sent a clear message on tapering its Quantitative Easing program. Now, we have what could be interpreted as forward guidance on unwinding stimulus. The overall tone suggests that last week’s 100 billion-pound ($125 billion) increase in the Covid QE package might be the last.