MNI BRIEF: BOE Balance Sheet Reduction On Course - Saporta

The Bank of England's balance sheet transition is going as expected but is not yet at the preferred minium range of reserves, Victoria Saporta, Executive Director of the Markets Directorate said Friday.

Speaking at an ECB money markets conference in Frankfurt, Saporta said the BOE is “learning by doing” to ensure the operating framework is effective when the PMRR is reached.

Saporta said the overall liquidity landscape has "fundamentally changed compared to the last time reserves were less abundant", with hgher government bond supply and a related increase in
demand for NBFI funding through the gilt repo market have both likely put upwards pressure on repo rates.

"There have been, and will continue to be, bumps in the road, accentuating the need to keep short-term market interest rates linked to Bank Rate through well-functioning central bank facilities, from both a monetary control and financial stability perspective," she said. (see MNI INTERVIEW: Ex-BOE Markets Head Doubts Mass Repo Tactic )