BOE Governor Bailey Hints at Additional Asset Purchases... "Spreading Out COVID Costs"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Andrew Bailey, Governor of the Bank of England (BOE), hinted at the possibility of additional asset purchases. He explained that as the government's cost burden due to the novel coronavirus disease (COVID-19) increases, this could help distribute the costs.

On the 13th (local time), Governor Bailey appeared on an ITV program and was asked whether the government should reduce spending to restore balance amid the expected large-scale fiscal deficit caused by COVID-19. He responded, "There are options. I hope they are considered very seriously."

Governor Bailey explained, "In my view, the BOE, which holds more government bonds than it did 10 or 12 years ago during the global financial crisis, can supply credit to keep everything generally in place." He added, "Over a long period, we can help distribute costs to society. That is important to me. We have options and need to utilize them."

He also suggested that the BOE would increase the size of its bond holdings beyond the initially planned ?200 billion, which was set to be expanded last March. He said that a severe economic recession is appearing at the end of the first quarter and that it is quite clear that the financial market expects the BOE to increase the scale of asset purchases. ITV reported, "It is very unusual for a central bank governor like Governor Bailey to state that government bonds will be purchased to eliminate the government's debt and spending crisis."

On the 7th, the BOE decided to keep the base interest rate at the current level of 0.1% and not to change the size of the asset purchase program at around ?645 billion. Regarding this, Governor Bailey revealed that most of the nine monetary policy committee members wanted to keep options open rather than make a decision on additional asset purchases at that time, waiting for more economic data to come out.

This content was produced with the assistance of AI translation services.