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Bailey Has Noted "Difficult Message" Of Bond Buys Plus Monetary Tightening

BOE
One of this session's debates is whether today's temporary bond buying announcement can be interpreted as a monetary policy signal, and/or a "pivot" away from tightening - comments by BoE Gov Bailey last month convey that it is not intended as such.
  • A quote from Bailey at the Jackson Hole symposium to that effect is making the rounds. In a Q&A for a session on central bank balance sheets, he addressed the seeming contradiction between restarting asset purchases to intervene for financial stability reasons at a time of monetary tightening (as quoted by Bloomberg):
  • “In March 2020, what we saw was the demand for credit changing that relationship between reserves and credit advancement, and putting strain on the system such that you would expect some form of central bank intervention. And the question is, in the future, what is that form of intervention going to look like?”
  • “There is a very challenging question in a tightening monetary policy world, if we need to intervene for financial stability reasons, because doing central back asset purchases in a world where you are tightening policy is a very difficult message to get across to the outside world.”
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One of this session's debates is whether today's temporary bond buying announcement can be interpreted as a monetary policy signal, and/or a "pivot" away from tightening - comments by BoE Gov Bailey last month convey that it is not intended as such.
  • A quote from Bailey at the Jackson Hole symposium to that effect is making the rounds. In a Q&A for a session on central bank balance sheets, he addressed the seeming contradiction between restarting asset purchases to intervene for financial stability reasons at a time of monetary tightening (as quoted by Bloomberg):
  • “In March 2020, what we saw was the demand for credit changing that relationship between reserves and credit advancement, and putting strain on the system such that you would expect some form of central bank intervention. And the question is, in the future, what is that form of intervention going to look like?”
  • “There is a very challenging question in a tightening monetary policy world, if we need to intervene for financial stability reasons, because doing central back asset purchases in a world where you are tightening policy is a very difficult message to get across to the outside world.”