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Saunders on the level of reserves in the system

BOE
  • "In terms of the relationship between APF rundown and the level of reserves in the banking system, because when you do asset purchases, you expand the level of reserves in the banking system and when you do gilt sales, you reduce the level of reserves. It's likely that the equilibrium level of reserves may well be higher than it used to be previously. As the APF, if and when it is reduced, and the level of reserves falls, the BOE has tools to ensure that banks have adequate reserves. We've said in the guidance of August 2021 we will do regular assessments of what levels of reserves banks need to hold, and we'll aim to ensure that those are always adequately supplied."
  • "In terms of using gilt sales to lean against inflation expectations as an active policy tool... I have to say I'm not in favour of that. If you got down the route of gilt sales, it would be something set every now and then, but with Bank Rate being the active policy tool."
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