Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

The Big Taper starts one central bank at a time. But you gotta keep the markets from swooning with a bit of welcome delusion.

By Wolf Richter for WOLF STREET.

The Bank of England’s Monetary Policy Committee (MPC) today announced that it voted unanimously to maintain its policy rate at 0.1%. But in terms of its asset purchases, it took the trail the Bank of Canada blazed last November and then widened in April: tapering.

The BoE announced that the blistering pace of its asset purchases would be “slowed somewhat”  – tapering the bond purchases from £4.4 billion a week to £3.4 billion a week – but that this tapering was an “operational decision” that “should not be interpreted as a change in the stance of monetary policy.”

This “is not a tapering decision,” emphasized BoE governor Andrew Bailey during the press conference. The reason this tapering is not “a tapering decision,” he said, is because the BoE left its target for the final level of QE assets unchanged.

Unlike the Fed, the BoE doesn’t have an open-ended QE, but had set a target of bringing its holdings of UK government bonds to £875 billion and its holdings of corporate bonds to £20 billion, for a combined target of £895 billion. And at the meeting, the BoE didn’t change these “fixed amounts,” as Bailey put it.

Obviously, denying that tapering is tapering was designed to mollify the markets with a welcome dose of delusion, and it worked: the UK’s stock index FTSE 100 rose 0.5% for the day.

However, when the members voted on maintaining the target of £895 billion, it wasn’t unanimous, with eight members voting for maintaining it, and one member, outgoing chief economist Andy Haldane, voting to lower it by £50 billion, to £845 billion.

The Bank of England has other assets on its balance sheet, in addition to the QE-related government bonds and corporate bonds.

Following the Brexit vote in 2016, the BoE’s total sterling-denominated assets surged as it was using QE to pump up asset prices. This ended in 2018. But then the Pandemic hit, and the BoE’s assets skyrocketed:

The Bank of Canada also denied initially it was “tapering.”

The Bank of Canada, which now has a super-mega housing bubble on its hands, blazed the trail last October when it announced that it would taper its purchases of Government of Canada bonds from C$5 billion a week to C$4 billion a week, and that it would stop buying MBS altogether. This wasn’t tapering, it said; it was just “recalibrating the QE program to shift purchases towards longer-term bonds…” and yada-yada-yada.

Then in April, it announced that it was in fact tapering, and that it would further taper its government bond purchases from C$4 billion a week to C$3 billion a week.

This came after it had announced in March, citing “moral hazard” as reason, that it would unwind its crisis liquidity facilities, and that this would reduce its total assets by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. And this has now transpired on its balance sheet as of the week ended April 28:

Other central banks too...

The central bank of Norway, Norges Bank – which never got into QE in the first place, and therefore cannot taper – confirmed today that it would raise interest rates in the second half of 2021.

Sweden’s central bank, the Riksbank, announced in late April that it is following through on its plan and completely end its QE program later in 2021.

The central banks of Brazil, Turkey, and Russia, whose economies are grappling with surging inflation, already announced shock-and-awe rate hikes.

Now lagging behind are the biggies, the Fed, the ECB, and the Bank of Japan. And taper talk is all over the place.

In the US, a veritable cacophony of tapering talk has erupted in public with multiple daily speeches by Fed governors, spearheaded by Dallas Fed President Robert Kaplan, who today said he wants the Fed to start talking about tapering “sooner rather than later.”

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  69 comments for “Bank of England Now 2nd Central Bank to Taper, After Canada, but Denies Tapering is “Tapering,” also Following Canada

  1. MiTurn says:

    “Obviously, denying that tapering is tapering was designed to mollify the markets with a welcome dose of delusion, ”

    So the markets can be fooled or they’re just in on the game?

    • Fat Chewer. says:

      The AI traderbots can be fooled for a while until they adapt, then it’s back to business as usual.

    • Wolf Richter says:

      Markets WANT to be fooled.

      • Tom Stone says:

        Wolf, look at housing.
        FOMO rhymes with “Buy now or be priced out forever” to me.
        Fundamentals don’t matter until they do…

      • So what planet does Kashkari live on? He makes statements about Wall St being upset with Fed policy? Does he really think Fed policy is being conducted for the benefit of the labor market? Today we have new highs in stocks and the jobs report is only 1/4 of the million new jobs expected? He has zero sympathy for Wall St? You bad boys, here have some more money.

  2. Martin says:

    Dear lord, thank you for that. I wish this QE will end soon.

  3. rhodium says:

    The infamously never before achieved, slow pop. Here it comes.

  4. 2banana says:

    Tapering is now a political decision as it will make/break political careers and political parties.

  5. eastern bunny says:

    I look at those charts and all I see is a little downward dive before central bankers accelerate to the next step higher, which should bring Fed’s balance sheet close to 20 trillions.
    I expect it to happen the day the stock market falls by 10%.
    We have passed the point of no return, you can’t taper a Ponzi scheme.

  6. MonkeyBusiness says:

    They will taper and simultaneously introduce a different kind of stimulus.

    Net net, CB balance sheet will still go up.

  7. One good taper tantrum and they are back to it. Also of note is Powell’s likely adherence to his own employment benchmark, while he has the Bernanke precedent to fall back on. The markets knows these guys are lying through their teeth.

  8. timbers says:

    That reporter who was told by Powell that vaccines is making assets go up needs to ask Kaplan what’s up with his noise about tapering? Doesn’t he know vaccines are responsible for bubbles?

    • zr says:

      Kaplan is just an apostate heathen who shall be [you know what] for always dissenting with our enlightened orthodoxy from the Fed and JPOW. To utopia we shall arrive!!

    • Old school says:

      Story I keep hearing is that QE just inflated asset prices, but now that fiscal policy is to spray money at everyone while paying them not to be productive inflation is on.

      I hope they are happy with the results. It’s a twofer. Housing becomes expensive due QE and due to commodity inflation.

      • timbers says:

        Every Big US corporation paying close to 0% corporate taxes, should have their “offshore” USD account seized by the IRS.

        And, all those corporations paying nothing in corporate taxes (but we have the mostest highestest corporate tax evuh!) should pay the same rate we pay.

        Then, those funds instead of being credited back to rich corporation to the point they pay nothing but get subsidies you and I pay for….those funds should be combined with the seized “offshore” profits that are delinquent in taxes owed, and used to pay American workers higher wages commensurate with productivity gains, which I read would put wages around at $25-$30/hour.

        It’s only fair. Bill and Melinda Gates, Koch Bros, Slave labor King pin Bezos, Ex multi millionaire Prez’s and Fed Chairman and their billionaire buddy friends can afford it.

        • cas127 says:


          It was DC that wrote the laws that allowed large corps like Apple (lib icon CEO and everything) to park overseas profits overseas (likely as an offset to taxes paid to foreign gvts) and DC could have changed the law at any point over decades.

          Wanna tax it, fine…although my sense is that billions/tens of billions in tax revenue won’t come anywhere close to covering trillions in new DC spending/kickback plans.

          Ditto “zero tax” domestic corporations…many of whom are not paying taxes because of prior years’ offsetting losses.

          But don’t let complicating facts get in the way of a good ideological froth.

          Again, don’t care…big corps can defend themselves…but the imagined trillions in “stolen” taxes aren’t likely there…and certainly not in the quantities necessary to offset the costs of decades of failed DC economic policies.

          The whole debate reminds me of the “why can’t the richest country in the world afford X” or “program X only costs 1% of GDP” debates…they are all predicated upon imaginary “facts” and therefore habitually fall short when implemented in reality.

          So the country gains $100, while anticipating $1000, and spending $10,000.

          That habitual DC dynamic is how you end up with a country as economically crippled as the US (debt-to-GDP, inflation to devalue debt)

      • Bobber says:

        I don’t see how today’s college graduate will ever be able to buy a home in their lifetime. With inflation of consumer goods and rent, they’ll have to spend everything they make to survive. What little savings they muster will earn a negative real yield. The Fed has taken home ownership away from them.

        If through good fortune they are able to save a down payment on a house, they’ll get there just in time to watch their down payment evaporate as everything blows up in the Fed’s face.

  9. I think Bank of Canada is the central bank to watch. Along with Norges Bank of Norway, these two central banks have gotten the message loud and clear that a dozen years of very loosey goosy monetary policies around the globe are having a very detrimental effect on general price levels. Runaway inflation is not good for any country’s economy as it severely erodes the purchasing power of the populace whose incomes only begin to be adjusted until it is too late to matter.

    Speculative environments that all central banks have fed like comic-strip monsters are eventually going to have too much money chasing two few goods and assets.

    The American investing public is not stupid. Regardless of the twisted and false verbiage spewing from FedHeads’ mouths, we all can observe what is happening to rates in the bond market, mortgage rates, money market rates, and many other costs of credit where the market takes the lead and the pathetic Fed eventually has to follow. Things will be so out of control on the inflation front by Fall, 2021, that the Fed will be forced to raise short-term rates by 1/4% to 1/2% by Turkey Time. The markets will be given plenty of warning so Powell’s Blackstone account is not too negatively affected, but 5% inflation at the CPI level will put demand for U.S. Treasuries at the bottom of the toilet bowl. Grossly negative Real Rates of Return are not hard to calculate.


  10. The Bob who cried Wolf says:

    My suspicion is that rates will start ticking up in the very near future (like within weeks or a couple of months). Even the compliant dim wits shoveling garbage news down our throats can’t hide what’s happening to prices of everything across the board.

    • sunny129 says:

      Any tick up will be interpreted as ‘transisionary’ by Powell.
      Untill the headline inflation exceeds 10%, nothing will change.
      After the next 2-3 qtrs, economy loses it’s steam and back to dis-inflation.

      Covid is NOT going away! With massive debt and leveraged supported mkts cannot stay float without additional credit expansion. Final destination is DEFLATION!

  11. David Hall says:

    In 1996 Fed Chairman Alan Greenspan warned the stock market was overpriced due to irrational exuberance. The stock market started to sink in 2000.

    • MonkeyBusiness says:

      Dow 100K then?

    • qt says:

      MB, I think the point here is people can be a lot more stupider (think NFTs, Dogecoins, etc.) than you think. With that said, we are probably closer to the end than to the beginning. So it will probably crash near end of summer or fall. But who knows for sure, this bubble can go on until 2022 LOL.

      • RightNYer says:

        I agree. The P/E for the S&P is almost at 45. It was nowhere near there in 1996.

        • Auldyin says:

          That’s 45yrs to get your money back from earnings. I’ll be long gone before then and so will many others.
          I just couldn’t figure it, until an investment pro told me, in the digital economy, it’s not P/E that counts, it’s P/C.
          That’s right, price to click ratio. I thought he was jossin’ with me but apparently some people do this.

    • Beardawg says:

      Bubbles will Pop in November 2022

  12. Micheal Engel says:

    1) USDCAD daily : today, a big red HQ bar, no wicks at the bottom,
    (the close at the low) @1.215.
    2) USDCAD weekly : nonstop dived to Sept 11 2017 Harami, the Fed baby !
    3) Today, SPX daily closed a gap above.
    4) SPX weekly : Fri, possibly closing at a new all time high, after two inside (Harami) babies.
    5) Tomorrow SPX weekly : DM #9, possibly a Hanging Man at the top.
    6) Bitcoin : in distribution since Feb 21 buying climax.

    • Could you augment these updates with your actual trades and actual positions so people can see how well your trading methodology works in practice?

      • Uncle Salty says:

        I’d prefer not to know the specific details and outcomes of another trader’s activities in the markets. And I could give a shit about another trader’s strategies and tactics. Besides, most posts would be nothing but lies anyway.

        This is such a fantastic website, with tons of wisdom and insight. Let’s not dumb it down. There are other forums such BS.

        No disrespect to M.E. or OI.

        • I don’t always read all of the comments, but I have read enough to know that Micheal has posted very persistently and some have expressed an interest in understanding him better.

          Show him some love, Uncle Salty. Say something to encourage him to express himself more.

        • Regarding lies, looking at the facts is precisely what prevents lies. If I say I’m going all in on bitcoin and buying at the current price of $56000, I cannot later say that I knew all along that Bitcoin was going to crash to $10,000 and that I’ve been shorting it. See my point? By hiding my actual trades, I get to lie. It’s the exact opposite of what you claim.

  13. J-Pow!!! says:

    Hahahahahahaha!!!!! Just a little more oomph at the top, baby!!!! Then I’m gonna get my SELL on before I taper and raise rates!!!!! I have made so much money!!!! BBBRRRRRRR!!!!! Literally — I have made so much money!!! Hahahahahaha!!!!!! My term is almost up!!!! I’m gonna retire to the Bahamas and hand this problem off to the next guy!!! Hahahahaha!!!!!! YEAH!!!!

  14. Depth Charge says:

    The central banks of the world are destroying civilization.

    • MiTurn says:

      Or attempting, with complicity, to create a new one.

    • BigAl says:

      @Depth Charge

      Not all of it.

      Things are looking rather good for Russia & China….’s the “Washington Consensus” crowd that appears to be on the ropes.

  15. Auldyin says:

    Great to see you looking at ‘Old Blighty’, Wolf. I bet your charts could start a revolution here. Did you like the Public Schoolboy language? “slowed somewhat”. BS.
    Fund managers here are saying the ‘Ftse’ fall was due to Yellen’s ‘faux pas’ about rates possibly having to go up, which she promptly retracted, and the Ftse topped 7000 again almost immediately.
    Either way, talk of tightening seems to be in the air. I wonder if they are trying to gauge how sensitive markets will be to a ‘real’ move. The whole QE business here, is very interesting because the Chancellor and the MPC have to go before a committee every month live on TV. There is one MP who has asked them to explain to him what the precise difference between QE and the Bank of Zimbabwe is? We all await the answer on the edge of our seats. The MPC is supposed to be setting rates ‘independently’ of Govt, and Govt is meant to borrow ‘independently’ of the BoE but they can’t be, and the MP wants it explained to him in full detail. Great fun!
    Unlike your S&P which has been on a one way street we have had the mother of all Bull&Bear battles over 7000 on our Ftse ever since Brexit. We topped it last month for the first time since Covid but it fell back again on rate worries, but we topped it again today. I’ve got my fingers crossed the bulk of the sh** is now behind us and I’m hoping I’m off to the races at last after years of zilch.

    • Depth Charge says:

      Please do tell us how they answer the question, though I am sure it will just be another grand lie like everything else.

  16. jrmcdowell says:

    Throughout much of history, wealth was taken by force by plundering armies. Now, it’s being furtively acquired by plutocrats through keyboard operations. We’ve come a long way from the raiding hordes of conquering empires to the humming printing presses of central bankers.

  17. Auldyin says:

    On UK.
    In year 20-21 UK deficit was £300bn, worst since WW2.
    Equates to £5k for every man, woman & child in the country or £20k for an average family with an average wage circa £30k. On the basis that deficit is deferred tax, that family only earned £10k which wouldn’t have covered their living expenses without the Govt kicking it off into the future alongside all the other Bns they owe already.

    • topcat says:

      Where did you get this data?
      From ONS….
      The current account, which includes investment income and transfers as well as trade, saw a deficit of £74 billion in 2020, compared with £69 billion in 2019. The current account deficit was 3.5% of GDP in 2020 compared with 3.1% in 2019.

      • Auldyin says:

        We’re on different wavelengths I think, I’m talking about the budget deficit, (ie tax v spend) you’re talking about the trade deficit?
        Trade deficit is bad enough but budget deficit is horrendous.
        My data is reported by BBC on digital news, easier to access than ONS. They’re more likely to make it better rather than worse.

        • topcat says:

          Ah ok.
          The budget deficit though is, as per MMT, totally irrelevant and can in principle be as big as it likes without causing any problems whatsoever. The government just has to mop up the liquididty to prevent inflation.

  18. makruger says:

    Perhaps once the western world (led by the USA) blows up the global economic system once an for all, we can finally have another look at establishing Breton Woods # 2.

    Perhaps it’s just a coincidence, but today I visited the Mount Washington Hotel in northern New Hampshire which was the location of this epic 1944 agreement.

    Unfortunately the Breton Woods agreement only lasted for about 27 years. But the hotel is still there. Nice place, you should visit.

  19. Depth Charge says:

    Has anybody anywhere EVER asked the FED why, if QE works, then why they’re still having to do it 13 years after Bernanke started it?

    • Sir Eduard R Dingleberry III says:

      They don’t know how to get out of this. They can’t get politicians to cut spending or raise taxes (without loopholes). It is just CYA for them until the blowup. Best idea they have is inflation to minimize the debt. Geniuses. There is no willpower for anyone to tell anyone to stop doing things that are bad for the future in this country. I guess this is how civilizations collapse. Could last another 10 years. Hold on to your hats.

    • Mojer says:

      Humanum fuit errare, diabolicum est per animositatem in errore manere.

      “Making mistakes is human, but persevering (in error) is diabolical”.

      The arrogant people same JP have been repeating the same mistakes for two thousand years.

      • Tom Stone says:

        Mojer, it’s DIFFERENT this time.
        These are the smartest guys in the room and they have it figured out.
        Heck they hired Suzanne to do the research and you can’t do better than that!
        Trust me, I’m a Real Estate Broker.

  20. Xavier Caveat says:

    What if the usual suspects got a car bubble going, and tired 2005 Chevy Suburbans with 187k miles are fetching $150k in feverish trading?

    Free money is like fertilizer, it’s only good if you spread it around…

    • Depth Charge says:

      Then you could be sure the billionaire crowd would be involved. Elon Musk would be Tweeting pictures of clapped out jalopies that he was trading by the score, encouraging the unwashed masses to pad his bottom line. The billionaires are in a speculative orgy right now, and they’re flaunting it.

    • Auldyin says:

      It’s the ‘Mushroom Method’
      Keep ’em in the dark and bury them in BS every so often.

  21. Brent says:

    @Depth Charge

    Piece of cake…

    I called Federal Reserve Board of Governors PR phone listed here:

    First I heard 70’s tune:

    I was sitting by the phone
    I was waiting all alone
    Baby by myself I sit and wait and wonder about you
    It’s a dark and dreary night
    Seems like nothing’s going right
    Won’t you tell me honey how can I go on here without you?

    A nice lady picked up and answered all of my QE-related questions.She told me I was the only one to call during the past 13 years and that I made her day.

    I advised her to change music from modernist ABBA to more conservative Perry Como.Because Fed’s job is to be trusted,not to be liked.

  22. Depth Charge says:

    Weimar Boy Powell’s grand plan to start an inflation inferno is going to blow up in his and the governments’ faces. The notion that suddenly impoverishing over half the country is a good idea is laughable. This guy is full clown show and will go down in history as the most reckless lunatic ever to be in charge of a central bank.

  23. Jon says:

    US Fed won’t be tapering or raising rates anytime soon

    They won’t do anything to burst this bubble

  24. Franz Beckenbauer says:

    Short the FTSE 100

  25. YuShan says:

    The disturbing thing is that most people, including policy makers, always assume that the economy is some kind of linear system. That the fed can “step in” and raise rates by a few quarters of one percent and everything will be fine. That if you reverse a policy, that you then get back what you had before.

    But that is not how it works in the real world. A minor event usually triggers some kind of bifurcation after which you suddenly have a very different machine, which reacts very different to policy responses than before. Then it is panic because nobody knows how to deal with it.

    • Lisa_Hooker says:

      In all the econ classes I’ve been in over the years all the charts were continuous curves. Never once saw a discontinuous or step function. Not once. Saw them all the time in engineering classes. And how to deal with them.

      • Auldyin says:

        I’ve mainly noticed that downward trends go up from tomorrow and upward trends go down from tomorrow on Govt forecasts? eg Exports and Unemployment etc. etc. No?

  26. Lawefa says:

    Expect more of this. This is just start of the unscrupulous unraveling of vulnerable financial institutions. Call if what you want, it’s tapering.

  27. 2BFrank says:

    How to tell if a central bank governor is lying, check for a pulse, if he has one, he is lying, they are liars to their very soul, their prefrontal cortex is itself a lie.

  28. Jdog says:

    The entire world has reached a point of dystopia when it comes to lying.
    Orwell sure did have the future pegged when he foresaw new speak becoming the norm.
    Everything coming from any government or mainstream media source is almost guaranteed to be a blatant lie that only fools would believe….

  29. Lisa_Hooker says:

    Tapiring is hunting wild pigs in Central and South America.

  30. Fat Chewer. says:

    There will be no tapering here in Oz. The printed QE dollars go straight to the wealthy and they now consider it their right as the elite to suck on that teat. They truly believe they deserve it.

    • Fat Chewer. says:

      The conservative incumbents will keep this shitshow going until they are eventually voted out for their eternal incompetence and the new Labor government will have no choice but to allow rstes to rise and crash the bubbles which will cause a recession and the conservatives will blame it all on Labor for eternity.

    • Fat Chewer. says:

      America, we owe you an eternal debt of gratitude for introducing wedge politics into the Australian politcal landscape.

      That. Was. Sarcasm.

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