BOE’s Cunliffe: Closely monitoring LDI funds to ensure resilience
|The Bank of England (BOE) Deputy Governor Jon Cunliffe said in a letter published on Thursday, the bank and FPC continue to monitor market conditions and channels through which vulnerabilities could amplify future market stresses.
Further quotes
The FPC will publish its next financial policy statement and record on Oct. 12.
BOE, TPR and the FCA closely monitor the progress of LDI funds as they take action to put their positions on a sustainable footing for whatever level of asset prices prevails.
Want to ensure LDI funds are better prepared for future stresses given the current volatility in the market.
It is important that lessons are learned and appropriate levels of resilience are ensured.
The MPC will make a full assessment of recent macroeconomic developments at its next scheduled monetary policy meeting on 3 November.
BOE’s operations in gilt market are not intended to create central bank money on a lasting basis, nor are they designed to cap or control long-term interest rates.
They should not shift the underlying monetary trends in the economy, which ultimately pin down developments in inflation, and so they are not monetary policy operations.
The FPC recommended that the bank take action, and welcomed the bank’s plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace.
Market reaction
GBP/USD is feeling the heat from the BOE commentary, as it drops back below 1.1300, down 0.34% on the day.
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