Statement of the Monetary Policy Committee 23 March 2020
The COVID-19 pandemic, the measures taken to hinder the spread of the disease, and the economic repercussions of the disease are expected to call for a significant increase in Treasury expenditures. As a result, the outlook is for the Treasury outcome to deteriorate this year and for the Treasury to need to acquire substantial credit financing through bond issuance. Other things being equal, this will reduce liquidity in circulation and push Treasury bond yields upwards, which disrupts normal monetary policy transmission at a time when the Central Bank’s policy actions are aimed at easing households’ and businesses’ financial conditions.
The Monetary Policy Committee will do what is needed so that the more accommodative monetary stance is transmitted normally to households and businesses. The Committee therefore decided at an extraordinary meeting yesterday that it would begin direct purchases of Treasury bonds in the secondary market. Further information will be published at a later date.
23 March 2020