The Bank of England plans to decrease the cash buffer it holds for unexpected losses as it winds down its quantitative easing bond-buying program. This decision, made by Governor Andrew Bailey and Chancellor of Exchequer Rachel Reeves, aims to provide better value for taxpayers.
The details of this adjustment were outlined in a series of letters accompanying the latest projections on lifetime losses from the Bank's asset-purchase facility, which was established to acquire £895 billion ($1.1 trillion) in bonds. The original purpose of this initiative was to stimulate growth and combat deflation during the 2008 financial crisis and the 2020 pandemic.
This move signifies a strategic shift in the Bank's approach to managing its financial risks as it navigates the complexities of post-pandemic economic recovery.