BoE can carry on with bond sales programme, Ramsden says
Adds background, economist reaction
LONDON, Aug 1 (Reuters) -The Bank of England can carry on with its programme of bond sales - known as quantitative tightening - over the coming year even as interest rates fall, Deputy Governor Dave Ramsden said on Thursday.
"We're confident that QT can keep operating in the background, for the next year, consistent with our principles," Ramsden said at a press conference after the BoE cut interest rates for the first time since 2020.
In its latest report, the BoE repeated its view that the impact of its QT sales so far had been limited, adding that the level of interest rates would allow it to fine-tune monetary conditions if the impact proves greater in future.
"And given where Bank Rate now is, if there needs to be some kind of adjustment, we've got more than enough space to do that," Ramsden said.
Tomasz Wieladek, chief European economist at asset management firm T. Rowe Price, said the BoE's report did not mention a surge of purchases of gilts by large overseas official investors which had pushed down yields and weakened the observed impact of QT.
"This has reduced the effects of QT by roughly 60-70%," Wiedalek said, adding he doubted the trend would continue.
"The effect of QT will likely be much stronger in the next two years than in the past two years," Wiedalek said.
The BoE bought some 875 billion pounds ($1.1 trillion) of gilts over more than a decade after the 2008-09 financial crisis, using freshly created reserves to stimulate Britain's economy, a process known as quantitative easing.
It is now in the process of selling down its holdings of gilts through a combination of active sales and allowing bonds to mature. Its stock currently stands at 691 billion pounds.
($1 = 0.7801 pounds)
Reporting by Andy Bruce and and Alistair Smout, writing by William Schomberg, editing by Christina Fincher
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