MNI BRIEF: BOE Bailey Says Can Halt QT If Markets Stressed

Bank of England Governor Andrew Bailey said Wednesday the end point for balance sheet reduction was unknown and that the Bank was ready to suspend quantitative tightening if markets conditions were to become stressed.

Bailey, speaking at an IMF event in Washington, said the Bank would watch closely for signs that it was shrinking the balance sheet to a point where it was no longer meeting market participants' demand for central bank reserves which would be reflected in dislocation of pricing in rate markets.

"We have to watch very carefully for where we hit that resistance point," Bailey said, adding that they had seen no signs of such stresses so far and that the standing repo facility to help provide market liquidity has yet to be used.

The BOE has no target for balance sheet reduction and Bailey said that the end point would never be fixed as it would vary over time depending on market conditions.

In other remarks he said that the upside inflation skew in the most recent Monetary Policy Report was the largest on record and that policymakers had to take that large upside inflation risk into account in their decisions on Bank Rate.