This paper (the ‘Red Book’) describes the Bank of England’s framework for its operations in the sterling money markets. It can also be found on the Bank’s website at www.bankofengland.co.uk/markets/money, where it will be updated periodically.
The Bank of England’s framework for its operations in the sterling money markets is designed to implement the interest rate decisions of the Monetary Policy Committee (MPC)while meeting the liquidity needs, and so contributing to the stability of, the banking system as a whole.
The Bank has four specific objectives:
Objective 1: Overnight market interest rates to be in line with the official Bank Rate, so that there is a flat money market yield curve, consistent with the official Bank Rate, out to the next MPC decision date, with very limited day-to-day or intraday volatility in market interest rates at maturities out to that horizon.
Objective 2: An efficient, safe and flexible framework for banking system liquidity management — both in competitive money markets and, where appropriate, using central bank money — in routine and stressed, or otherwise extraordinary, conditions.
Objective 3: A simple, straightforward and transparent operational framework.
Objective 4: Competitive and fair sterling money markets.
