MNI Brief: BOE's Ramsden-Flat Rates Back QE/Bank Rate Rethink

Market expectations for near flat Bank Rate over the next quarter of a century justify the Bank of England's move to rethink its strategy of not unwinding the stock of quantitative easing until the benchmark rate is raised from 0.1% to around 1.5%, said BOE Deputy Governor Dave Ramsden.

The BOE has publicly asked Bank staff to revisit its unwind strategy and Ramsden's comments make the case for a change in approach. The National Institute of Economic and Social Research's deputy director Hande Kucuk took a similar line in a recent interview with MNI, saying the BOE was likely to indicate it would start unwinding quantitative easing before hiking Bank Rate.

Market "expectations of where Bank Rate will be ... peaks at about 85 basis points 25 years out," Ramsden said in a Birmingham University Q&A. "[in] that context I think it is reasonable for us to be revisiting the way we think about the relationship between interest rates and the stock of bonds [bought through QE]."