Bank of England Governor Andrew Bailey said on Monday that the central bank should start to reverse its quantitative easing asset purchases before raising interest rates on a sustained basis, a reversal of long-standing BoE policy.
The BoE increased its bond purchase target to 745 billion pounds ($922 billion) last week, and in March it cut its main interest rate to a record low 0.1%. But Bailey said this level of central bank asset purchases “shouldn’t always be taken for granted”.
“When the time comes to withdraw monetary stimulus, in my opinion it may be better to consider adjusting the level of reserves first without waiting to raise interest rates on asustained basis,” Bailey wrote in an article for Bloomberg.
Under its previous governor Mark Carney, the BoE said it would raise interest rates materially before starting to sell past asset purchases back to the market, as it viewed interest rates as a nimbler policy tool.