BoE's Bailey: Unwinding QE does not seem like an imminent issue in current conditions

"The COVID crisis to date has demonstrated that quantitative easing (QE) and forward guidance around it have been effective in a particular situation," Bank of England (BoE) Governor Andrew Bailey said during his speech at the Jackson Hole Symposium on Friday.

Additional takeaways

"The structural drivers of low equilibrium interest rates suggest the use of central bank balance sheets for monetary policy will be more long-lived than had been anticipated."

"It looks from today’s vantage point that we were too cautious about our remaining firepower pre-COVID."

"QE clearly acted to break a dangerous risk of transmission from severe market stress to the macro-economy."

"There are times when we need to go big and go fast."

"Some evidence that the impact of QE over the past decade has been largest at times of market dysfunction and illiquidity."

"If the effects of QE are more powerful in crisis states of the world, we may need to ensure that we have enough headroom in the future to repeat it."

"The determinants of QE unwind may be more subtle than previously thought and the COVID crisis offers a new lens through which to assess its role."

"Central bank balance sheet may have more of a counter-cyclical role and function than the evidence of the last decade alone would suggest."

"Unwinding QE does not seem like an imminent issue in current conditions."

"We should keep the options to use all our tools as open as possible, would conclude the policy mix in next decade may be more nuanced than previously thought."

Market reaction

The GBP/USD pair retreated from the multi-month high it set at 1.3321 earlier in the day but continues to trade in the positive territory. As of writing, the pair was up 0.53% on the day at 1.3268.