Bank of England Governor Bailey said that as the central bank reduces the size of reserves to far below the current level, the market should prepare for a sharp increase in securities repurchase operations.
The Bank of England has accumulated up to £895 billion ($1.1 trillion) of assets during a ten-year period of quantitative easing, and is currently reducing its holdings of these assets by about £100 billion a year.
Bailey said that for investors, the reserve size of £345 billion to £490 billion is “a good starting point.”
“Looking ahead, we expect a significant increase in buyback operations, and the market should continue to prepare for this,” Bailey said in a statement issued by the Bank of England on Tuesday.
He said that the Bank of England will keep some British treasury bonds on its balance sheet.