BoE: neutralising net issuance
- The BoE started to stimulate alongside the Budget and launched an aggressive QE programme after a deterioration in the gilt market’s functioning. Monetary is following fiscal policy in the sense that it seeks to avoid an undesirable tightening.- With the DMO now planning to issue £180bn of gilts between May and July, the BoE’s purchases seem like a well-calibrated offset.
- At least a £55bn increase in the target stock would be required to prevent the net gilt issuance flow from rising before the summer. That expanded stimulus may be appropriate under the circumstances, but won’t occur just for the sake of it.
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