Latest News

UK’s Sunak not mulling change to BoE reserve remuneration

0
Economy36 minutes ago (Nov 02, 2021 16:00)

© Reuters. FILE PHOTO: Britain’s Chancellor of the Exchequer Rishi Sunak stops at a sweets’ stand at the Bury Market in Lancashire, Britain October 28, 2021. Lindsey Parnaby/Pool via REUTERS

By David Milliken

LONDON (Reuters) -British finance minister Rishi Sunak said on Tuesday he had not considered changing the remuneration of cash reserves that banks hold at the Bank of England, as this would damage the BoE’s effectiveness.

British lawmakers asked the finance ministry in July to review whether paying banks interest on only part of the reserves they hold with the BoE could be a way to reduce the impact on the public finances of higher BoE interest rates.

Sunak said in an appearance before the House of Lords’ Economic Affairs Committee, which made the request, that he did not view this as a realistic option.

“That’s not a policy we have actively considered recently,” Sunak said.

“Where you have seen tiering on reserve payments is only in those cases…where there’s a negative interest rate policy in place. You haven’t seen that where there are positive policy rates. It would obviously act to reduce the transmission of monetary policy,” he added.

The European Central Bank, which has a negative interest rate on bank deposits, exempts a portion of the reserves which banks hold with it from this negative rate in a form of tiering.

Financial markets widely expect the BoE to raise interest rates to 0.25% from 0.1% on Thursday, the first major central bank to do so since the start of the COVID-19 pandemic.

The House of Lords committee – whose members include former BoE Governor Mervyn King – previously criticised the scale of BoE quantitative easing, and expressed concern that the central bank could come under political pressure not to raise interest rates because of the impact on the public finances.

Sunak rejected a request from the committee to publish a document detailing the indemnity that the finance ministry has given the BoE to cover any losses from its 895 billion pound ($1.22 trillion) asset purchase programme.

($1 = 0.7345 pounds)

UK’s Sunak not mulling change to BoE reserve remuneration

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Update: Framing Lumber Prices Up Year-over-year

Previous article

MARKET WRAP: FTSE edges lower, GBP slips, oil falls, Ethereum hits record

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.

More in Latest News