The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.
- BLS Handbook of Methods
- Bureau of Economic Analysis
- Bureau of Labor Statistics
- Congressional Budget Office
- Economic Data - FRED® II, St. Louis Fed
- Office of Management and Budget
- Statistics: Releases and Historical Data, Board of Governors
- U.S. Census Bureau Economic Programs
- White House Economic Statistics Briefing Room
March 20, 2009
A look at the Bank of England’s balance sheet
The current financial crisis is global in scope, with central banks responding in various ways to mitigate the strains in their respective countries. The Federal Reserve is not the only central bank that has been aggressive in its response. For instance, the Bank of England's (BoE) Monetary Policy Committee, in its March 5 policy statement, explained the details of its new asset purchase program:
"…the Committee agreed that the Bank should, in the first instance, finance £75 billion of asset purchases by the issuance of central bank reserves. The Committee recognised that it might take up to three months to carry out this programme of purchases. Part of that sum would finance the Bank of England's programme of private sector asset purchases through the Asset Purchase Facility, intended to improve the functioning of corporate credit markets. But in order to meet the Committee's objective of total purchases of £75 billion, the Bank would also buy medium- and long-maturity conventional gilts in the secondary market. It is likely that the majority of the overall purchases by value over the next three months will be of gilts."
Thus, the BoE will purchase £75 billion of assets (approximately U.S. $108 billion as March 20 and U.S. $106 billion as of March 5), mostly intermediate-to-longer dated U.K. sovereign debt (or gilts) but also some "investment grade" corporate bonds. Along with this new asset purchase program, to ease strains in credit markets the BoE has previously implemented other efforts, such as purchasing commercial paper, asset-backed securities, and corporate bonds. But these earlier efforts were conducted in such a way that the BoE sterilized its purchases—that is, for every £1 of private assets it purchased, the BoE would issue £1 of its own debt (sterling bills), with the effect being that the money base (bank reserves plus currency in circulation) grew much less than the overall size of the balance sheet.
However, with the new asset purchase program, the BoE is targeting a quantity of U.K. sovereign debt to purchase in an unsterilized manner, hence the key phrase "by the issuance of central bank reserves." As stated, the BoE will be buying gilts, "with the aim of boosting the supply of money and credit and thus raising the rate of growth of nominal spending to a level consistent with meeting the inflation target [2% CPI inflation] in the medium term."
The impact of the BoE's efforts to support private credit markets can be seen in this chart of the size and composition of the BoE's assets:
As the size of the asset side of the BoE's balance sheet grew, so did the liability-side:
Notice that much of the increase in the liabilities has come from "other liabilities" and "short-term open market operations" and not "reserve balances." But with the new asset purchase program, reserve balances will become much larger.
By Laurel Graefe and Andrew Flowers, economic analysts at the Atlanta Fed.
TrackBack URL for this entry:
Listed below are links to blogs that reference A look at the Bank of England’s balance sheet:
- What’s Moving the Market’s Views on the Path of Short-Term Rates?
- Lockhart Casts a Line into the Murky Waters of Uncertainty
- How Will Employers Respond to New Overtime Regulations?
- How Good Is The Employment Trend? Decide for Yourself
- Is the Labor Market Tossing a Fair Coin?
- When It Rains, It Pours
- Pay As You Go: Yes or No?
- Was May's Drop in Labor Force Participation All Bad News?
- Wage Growth for Job Stayers and Switchers Added to the Atlanta Fed's Wage Growth Tracker
- Experts Debate Policy Options for China's Transition
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- November 2015
- October 2015
- September 2015
- Business Cycles
- Business Inflation Expectations
- Capital and Investment
- Capital Markets
- Data Releases
- Economic conditions
- Economic Growth and Development
- Exchange Rates and the Dollar
- Fed Funds Futures
- Federal Debt and Deficits
- Federal Reserve and Monetary Policy
- Financial System
- Fiscal Policy
- Health Care
- Inflation Expectations
- Interest Rates
- Labor Markets
- Latin America/South America
- Monetary Policy
- Money Markets
- Real Estate
- Saving, Capital, and Investment
- Small Business
- Social Security
- This, That, and the Other
- Trade Deficit
- Wage Growth