The Bank's money market framework

Roger Clews (), Chris Salmon and Olaf Weeken ()
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Roger Clews: Bank of England, Postal: Threadneedle Street, London, EC2R 8AH, http://www.bankofengland.co.uk
Olaf Weeken: Bank of England, Postal: Threadneedle Street, London, EC2R 8AH, http://www.bankofengland.co.uk

Bank of England Quarterly Bulletin, 2010, vol. 50, issue 4, 292-301

Abstract: The Bank of England implements the policy stance of the Monetary Policy Committee through its operations in the sterling money markets. It also uses these operations to reduce the costs of disruption to the liquidity and payment services supplied by banks. In order to ensure their continued effectiveness, it was necessary to adapt the framework for these operations in response to the significant changes to financial and monetary conditions that occurred during the recent financial crisis. This article describes how central banks can use their money market operations to implement monetary policy and provide liquidity support to banks and some of the issues that can arise when undertaking operations to achieve these two objectives. The article goes on to explain the Bank’s choices about its own operating framework, including how its thinking has been influenced by the lessons learned during the financial crisis.

Date: 2010
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