[London, 17th Reuters]-Bank of England (Bank of England) Deputy Governor Ramsden said on the 17th that the debate over the negative interest rate policy prepares for contingencies, and quantitative easing (QE) is still a major stimulus package. He said he thinks it is.
“Quantitative easing is a policy tool that has been used and tested,” he said in a speech to the University of Birmingham.
The central bank has doubled the size of its quantitative easing asset purchase program over the past year to £ 8,950 ($ 1.24 trillion) to mitigate the impact of the coronavirus crisis on the UK economy.
Ramsden acknowledged that quantitative easing is still the best way to fine-tune demand.
The central bank is currently buying government bonds at a pace of £ 4.4 billion a week, but the £ 150 billion additional purchase limit decided in November last year is expected to be filled by the end of 2021. As a result, he said, “the pace of purchases will slow further at some point this year, assuming there will be no significant deterioration in market functioning.”
The central bank said this month that it would need at least six months to prepare for the introduction of negative interest rates.
In this regard, Ramsden said, “Transparently the possibility of using monetary policy measures in the future in case of contingency,” as well as the work of considering new guidance for the parallel monetary tightening. “Verify with” said that it makes sense.
The central bank’s stance this month shows that markets are unlikely to introduce negative interest rates in the near future.
Mr. Ramsden emphasized that although there is a connection between large-scale government bond issuance and QE to secure the financial resources for urgent fiscal mobilization for the new corona, “this is completely different from the point of’fiscal finance’.”
He also noted that the rapid pace of corona vaccination in the UK has increased risk appetite in financial markets, pushing up expectations for short-term interest rates, but still at very low levels.
It also revealed that the central bank is struggling with how to ensure that the central bank’s purchase of corporate bonds is consistent with the government’s goal of reducing the carbon intensity of the economy.
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