Bank Rate Unchanged, Queasing Scope Widened and Increased Another £50 Billion

The Bank of England’s Monetary Policy Committee (MPC) today voted to:

• Keep the official Bank Rate paid on commercial bank reserves at 0.5%.
• Increase size of the the Asset Purchase Facility (APF), aka Quantitative Easing, by £50 billion to £175 billion.

Following today’s meeting of the MPC, the Governor and the Chancellor exchanged letters about the expansion of the Asset Purchase Facility. Those letters can be accessed using the links below in the notes to editors.

In an accompanying Market Notice, the Bank of England also announced to:

• Expand the range of gilts eligible for purchase to include all conventional gilts with a minimum residual maturity of greater than three years.
• To indulge in Gilt-lending. Whereby a significant amount of the gilts acquired by the Bank via the APF will be made available for on-lending to the market by the Debt Management Office (DMO) through the DMO’s normal repo market activity.

Repo is short for repurchase. The repurchase market simply involving Party A selling a financial instrument, such as a gilt, to Party B with a formal aggrement to buy it back in the future.

In this instance, it would appear that a particular gilt could be sold then bought back then lent then bought back . . . and so on.

Bank of England: MPC Meeting News Release (6 August 2009).

Bank of England: Market Notic – Gilt Purchases; Sterling Monetary Framework.

Bank of England: Governor’s letter to the Chancellor (6 August 2009) [PDF, 27k].

HM Treasury: Chancellor’s letter to the Governor (6 August 2009) [PDF, 432k].

Similar posts which may be of interest:

1. Bank of England Keeps Rate at 0.5 per cent, Quantitative Easing Continues
2. Secured Lending Expands in September as Unsecured Debt Contracts for Third Straight Month
3. Bank of England: Capital Issuance – August 2009
4. Inflation Expectations Unchanged, Satisfaction with Bank of England Falls
5. Lending to Individuals Turns Negative in July
6. Notes and Coins Expand 8.9pc on Year, Still Not Enough for 5-Weeks of Bills