Speech: Let’s get ready to repo!, by Victoria Sport
Given at Association for Financial Markets in Europe (AFME),
London
22 July 2024
We welcome the increased use of the [Short-Term Repo facility – STR] as a key mechanism in ensuring interest rate control as we normalise our balance sheet. To generate the reserves that will deliver on our vision of a demand-driven operating framework in steady state, we need to use other operations to complement the STR.
Second, out of the two most obvious ways of doing so, asset purchases and lending (e.g., through longer-term repo facilities), we think there is a good case to do so through repo. The Bank already has a facility in place that can play this role alongside the STR – our Indexed Long-Term Repo facility (ILTR), which supplies reserves in market-wide auctions for a 6-month period against a broad range of collateral. We are in the process of reviewing the calibration of the ILTR to ensure that it is effective and attractive enough to support potentially large provision of reserves. We will be engaging further with the market later in the year, including through a discussion paper.
The full speech is available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2024/july/lets-get-ready-to-repo-speech-by-victoria-saporta.pdf
Editor’s Note: this is a really good speech in laying out the Bank of England’s vision for how it provides liquidity and manages its required reserves. Worth reading for any market participant interfacing with the BoE.