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The transmission of the monetary policy tends to be less effective when rates are close to the lower bound, Bank of England Governor (BoE) Andrew Bailey said on Friday, as reported by Reuters.

Additional takeaways

“Toolbox decisions should not contain signals on preferences for the actual setting of policy.”

“Arguments are entirely without merit that BoE has compromised its independence by buying government debt.”

“The central bank is acting counter-cyclically to support demand in the economy consistent with its inflation target.”

“The independent pursuit of an inflation target does not mean that monetary policy is uncorrelated with other macro policies, including fiscal policy.”

“The interventions we have made are effective because the bank is independent, and because we will reverse these actions when conditions require that.”

“Inflation expectations in the UK have not become de-anchored or more volatile despite the greater economic volatility.”

Market reaction

The GBP/USD pair showed no immediate reaction to these remarks and was last seen gaining 0.3% on the day at 1.3712.