David Ramsden: Quantitative tightening - the story so far

Speech by Sir David Ramsden, Deputy Governor for Markets, Banking and Resolution of the Bank of England, at Bank of England event, organised by the Money Macro and Finance Society, London, 19 July 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you very much to the Money Macro and Finance Society for co-hosting this event here at the Bank of England.

My remarks today are going to focus on the Bank of England's experience of quantitative tightening (QT). The Monetary Policy Committee (MPC) set out its strategy for the mix of monetary policy instruments to deliver tighter policy in the August 2021 Monetary Policy Report (MPR), including the key principles that would underpin its approach to QT. Since then, those principles have been put into practice with QT commencing in February 2022, initially through maturities and augmented last autumn with a programme of gilt sales.

In September 2022, the MPC voted to reduce the stock of gilts held in the Asset Purchase Facility (APF) by £80 billion. By the end of September 2023, this will have reduced the size of the total APF by 11.6% when including corporate bond sales. Alongside their decision, the MPC committed to an annual review of the parameters of the QT programme, as part of which it would set the pace for the reduction in the stock of gilts held in the APF for the following twelve months.

The review will inform the MPC's decision on the pace of QT. That decision will be framed by the MPC's key principles; in particular, that QT is not the active tool for monetary policy. The Committee has a preference to use Bank Rate as its active policy tool when adjusting the stance of monetary policy. For me this means that QT should be thought of as operating in the background.