Bailey: no monetary reason forces BoE to enact reserves shake-up

The BoE’s governor, Andrew Bailey said on Tuesday there was no monetary policy reason to reduce or restructure the way the UK central bank pays interest on its reserves held by commercial banks.

“In my view, there is not a monetary reason, a monetary policy reason that is, for varying that. I think that any decision to vary that is a fiscal policy decision,” Bailey told the Economic Affairs Committee from the House of Lords.

Bailey also noted that the BoE had not had a conversation with the finance ministry about it. Sterling could move in response to Bailey’s testimony before the Lords Economic Affairs Committee.

Investors are eying any significant shift in Bailey’s policy rhetoric two weeks before the BOE meeting, but analysts believe this appears unlikely, but the proximity to the meeting also means that markets tend to over-interpret Monetary Policy Committee members’ comments.