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MNI POLICY: BOE Steering Clear Of Reserve Remuneration Change

(MNI) London

Any imminent change to BOE reserve remuneration seems implausible.

There is no sign the government will press the Bank of England to reduce interest it pays on reserves, a move which could save the public sector tens of billions of pounds a year and which has been recommended by former Deputy Governor Paul Tucker and other former senior BOE officials.

With the Treasury planning big tax rises and spending cuts in its Nov 17 statement, introducing a tiered system slashing rates on the reserves paid to banks in return for bonds they sold during quantitative easing could save around 1.6% of GDP in 2023–24 and 1.2% in 2024–25, according to Tucker, who assumed the BOE would press ahead with plans to sell some of its gilts.

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There is no sign the government will press the Bank of England to reduce interest it pays on reserves, a move which could save the public sector tens of billions of pounds a year and which has been recommended by former Deputy Governor Paul Tucker and other former senior BOE officials.

With the Treasury planning big tax rises and spending cuts in its Nov 17 statement, introducing a tiered system slashing rates on the reserves paid to banks in return for bonds they sold during quantitative easing could save around 1.6% of GDP in 2023–24 and 1.2% in 2024–25, according to Tucker, who assumed the BOE would press ahead with plans to sell some of its gilts.

Keep reading...Show less