On 3 March the Bank introduced reforms(1) to its daily operations in the sterling money markets, through which it implements monetary policy. The changes relate to the mechanics of its day-to-day operations in the money markets; they do not alter its basic approach to implementing monetary policy, which remains to manage short-term interest rates through open market operations.
The Bank made changes in three areas: it extended the range of instruments in which it conducts its daily open market operations to include gilt repo; it broadened the range of counterparties able to participate directly in these operations, to include market participants active in either or both of the gilt repo and bill markets; and it made some consequential changes to the arrangements through which it provides liquidity at the end of the trading day to adjust for any late imbalance in the market. This article describes the arrangements for the Bank’s money-market operations, including those aspects which have not been changed.
The Bank of England’s operations in the sterling money markets