OverviewThe MPC meets eight times a year to decide the level of the Bank Rate, which is paid on reserves balances held at the Bank. Monetary policy is therefore normally implemented in maintenance periods running from the day of one MPC decision to the eve of the next. The Bank Rate, paid on reserves balances, influences the whole term structure of sterling interest rates.
The Government announced on 19 January 2009 that it was authorising the Bank to purchase a range of high quality private sector assets as part of a package of measures to increase the availability of corporate credit. The following sterling assets were initially eligible for purchase: commercial paper, corporate bonds, paper issued under the Credit Guarantee Scheme (CGS), syndicated loans and asset-backed securities created in viable securitisation structures. All purchases were made by a subsidiary of the Bank, the Bank of England Asset Purchase Facility Limited (BEAPFF).
Following a further exchange of letters between the Bank of England and HM Treasury published on 5 March 2009, the Bank was authorised to purchase private sector assets financed by central bank reserves; and to purchase gilts in the secondary market financed by central bank reserves, as part of the implementation of monetary policy.
On the 6th August 2009, the Bank announced it was to participate in a gilt lending programme with the DMO. The objective was to avoid exacerbating shortages in the gilt repo markets of specific stocks due to the Bank withdrawing gilts from the market in purchases for the BEAPFF.
On 4 August 2016 the MPC voted to increase the stock of purchases of UK government bonds by the APF to £435bn. At the same time, the previous private sector asset purchase schemes were closed, and a new Corporate Bond Purchase Scheme was announced, with the Bank looking to purchase a portfolio of up to £10bn of sterling bonds representative of issuance by firms making a material contribution to the UK economy, in order to impart broad economic stimulus. The MPC also announced the Term Funding Scheme, designed to reinforce the transmission of Bank Rate cuts to those interest rates actually faced by households and businesses by providing term funding to banks at rates close to Bank Rate. Drawings in the Term Funding Scheme are also financed by central bank reserves.