MNI BRIEF: BOE Hauser Doubts Return To Small Balance Sheet

Remunerating central bank reserves was at the core of the Bank's system and he rejected the idea of ending that system, Bank of England markets head Andrew Hauser said Friday, while expressing pessimism that Threadneedle Street would be able to return to the sort of small balance sheet seen before the global financial crisis.

Hauser, speaking at King's College 'BOE Watchers' event, made clear that the Bank was set to carry on with a demand-led balance sheet with commercial banks and other financial institutions able to access interest bearing reserves on demand. He noted that the Bank's own survey of market participants showed an aggregate Preferred Minimum Range of Reserves (PMRR) of GBP335-495 bn although he stressed such figures were not reliable.

In other remarks, Hauser said that that from a balance sheet perspective it "Would be a very good ... outcome" if the Bank's Asset Purchase Facility (APF), its Treasury indemnified QE and QT vehicle, simply came to an end and the Bank had its own integrated balance sheet without it. He also stressed that gilt sales would continue if and when Bank Rate was cut.