The Bank of England would press on with plans to gradually sell its vast stock of British government bonds even if an economic slowdown eventually forces it to cut interest rates, Deputy Governor Dave Ramsden said.
The BoE is primed to become the first major central bank to sell some of the bonds it purchased during more than a decade of quantitative easing , with a 40 billion-pound sales programme likely to start next month.
"I think that's consistent with the way we communicated things, that we'll carry on with the pace of QT in the background," Ramsden said, speaking in his office at the BoE. "I think by embarking on QT, that does at the margin impart some further monetary tightening, but it's in the background compared to Bank Rate," Ramsden said.
Ramsden said the Bank was aware of this through its market contacts. Although it had tried to be as clear as possible about its QT plans, the BoE will be watching how the market responds to its gilt sales, he said. "So if you like, that's the demand that we will approach in terms of reducing our stock of gilts, but over a number of years," Ramsden said.
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