Price-Making and Last-Resort Market-Making in Gilts

Main points

• Debates about last resort last-resort market making are about debt management, monetary policy and financial stability. They should therefore include the parties directly responsible for those matters.
• The Bank of England’s statutory independence does not extend to financial market operations for which it needs an indemnity from the Treasury against losses.
• The Bank of England should be allowed the final say in the decision about when to act and what prices to bid (or quantities to bid for) when acting as market-maker of last resort.
• There needs to be standing arrangement between the Bank of England and the Debt Management Office to make quick decisions on last-resort market making.