MNI BRIEF: Ending Reserve Remuneration Wrong - BOE Bailey
BOE Governor Andrew Bailey pushed back against axing central bank reserve remuneration and predicted a large final Bank balance sheet
Bank of England Governor Andrew Bailey pushed back against the idea of ending reserve remuneration while predicting that the final size of the Bank's balance sheet would be at the top end of its previous estimates.
Central bank reserves are remunerated fully at Bank Rate, driving up interest rate costs as the rate has risen to 5.25%, leading to some calls for a rethink of the remuneration regime. However, Bailey opposed change in evidence to the Lords Economic Affairs Committee Wednesday, saying it would be "the wrong thing for us".
Asked if he still thought the final, steady state of central bank would be within the BOE's previous estimate of GBP325-480 billion Bailey said he'd "probably be towards the upper end of that range." He also said Bank Rate would settle somewhere in the middle of a zero to 5.25% range and expressed doubts about the power of forward guidance. (see MNI INTERVIEW: Forward Guidance Key Tool However It is Called)
MPC member Swati Dhingra could focus on balance sheet issues at an MNI event on Feb 21. (see MNI INVITE: Livestreamed MNI Connect VC with BoE Dhingra On Feb 21)