LONDON (Reuters) -The Bank of England allotted a record amount of one-week funds in a short-term repo operation on Thursday as it seeks to offset the impact on market interest rates of running down its stock of government bonds.
The BoE provided 7.587 billion pounds ($9.49 billion) of 7-day funds in its short-term repo operation, the largest single usage of the facility since it launched in October 2022, after other highs were set in recent weeks.
The previous record of 5.384 billion pounds was touched on April 11.
The BoE uses the weekly repo to help keep money market rates close to its official Bank Rate while it takes reserves out of the financial system with its quantitative tightening programme.
Under QT, the BoE is selling a large chunk of the government bonds that it bought over the past 15 years via its quantitative easing programme, and allowing others to mature.
Sanjay Raja, chief UK economist at Deutsche Bank (ETR:DBKGn) Research, said the spike in usage of the BoE's short-term reflected the rapid pace of the central bank's push to reduce the size of its balance sheet.
"What is now crucially important now is the Bank’s work in assessing the long-term composition and mix of its balance sheet," Raja said. "We will need some clarity from the Monetary Policy Committee on this sooner rather than later. We should hear more from the MPC in the summer."
($1 = 0.7996 pounds)