LONDON - The Bank of England could in future allow its holdings of government bonds to fall even at the same time as it cuts interest rates, Deputy Governor Ben Broadbent said on Thursday.
The BoE this month said it would no longer reinvest government bonds which mature from its 875 billion-pound ($1.17 trillion) stockpile, and will consider a programme of active sales once it has raised its main interest rate to 1%.
Broadbent said the BoE's policy was for interest rates to be the main tool for controlling inflation in future, while the size of its balance sheet - mostly gilt holdings - would slowly decline.
"Quite conceivably it is possible that the balance sheet will go through this very gradual reduction, even as Bank Rate potentially at times moves both up and down," Broadbent told a BoE research conference.
($1 = 0.7509 pounds)
