Bank of England's Ramsden reflects on QT and suggests when more may be needed

investmentweek.co.uk:

Sir Dave Ramsden, deputy governor for markets & banking at the Bank of England. Image: Bank of England

Speaking at an event on Wednesday (19 July), hosted by the Macro Money and Finance Society, Dave Ramsden reflected on the Bank's QT journey since the Monetary Policy Committee (MPC) set out its strategies in its 2021 Monetary Policy Report.

The MPC said it would use a mix of instruments to deliver tighter policy, including the key principles that would underpin its approach to QT. 

Those principles were put into practice in February 2022 initially through maturities and then augmented last autumn with a programme of gilt sales.  

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The following September, the MPC voted to reduce the stock of gilts held in the Asset Purchase Facility (APF) by £80bn. By the end of September 2023, this will have reduced the size of the total APF by 11.6% when including corporate bond sales. 

The MPC also committed to an annual review of the parameters of the QT programme, as part of which it would set the pace for the reduction in the stock of gilts held in the APF for the following twelve months.  

Ramsden said QT sales auctions have operated as intended so far and that the MPC will consider market functioning while it makes its decision on pace for the twelve months from October 2023 to September 2024. 

«In advance of that decision, I think the story is ‘so far, so good', he said. „Our QT programme continues to operate in the background. It is having only a limited impact on gilt yields, all else equal. 

“Market liquidity has declined somewhat over the past 18 months, in line with heightened macro volatility, but it has improved substantially since autumn 2022. There has