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MNI BRIEF: View QT Tipping Point 2026 'Very Uncertain' - BOE

(MNI) London

The Bank of England's assessment that quantitative tightening will not shrink central bank reserves to a point where they fall below banks' demand for them, and thus impair monetary policy transmission, until 2026 or later is very uncertain and banks should not be too comfortable with that assessment, the Bank's markets head Andrew Hauser said Friday.

Speaking at an ECB event, Hauser said as QT progresses the level of reserves will eventuall fall below that required by commercial banks but that it does not expect that to happen until 2026 or later but such estimates were very uncertain and while the US is dealing with that uncertainy by aiming to halt QT much earlier than its central estimates the BOE approach is to offer banks alternative liquidity through short term repos, allowing asset sales to continue.

In other remarks Hauser highlighted the fact the Bank's markets division has the power to adjust and amend gilt sales as it sees fit depending on market conditions, with the MPC only setting a pace. He also denied that recent events meant Liquidity Driven Investment were obsolete, but that it did highlight the risks coming for the non-banking sector, and the challenge is to deal with liquidity outside the banking sector, with current central bank tools clearly inadequate to deal with the challenges.

MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com
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MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com
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