Changes to base money do not, by themselves, materially change the incentives for broad money creation through bank lending.17 As was noted in the August 2022 MPS, the volume of commercial bank lending is determined by several factors including customer demand for loans, banks’ perception and appetite for risk, and prudential requirements on banks’ capital, cash and other liquid assets and funding.
While AMP tools have supported bank funding and liquidity positions, there is some evidence that suggests that this is not having an impact on lending activity over and above their impact on interest rates. 18 The OCR is set by the MPC based on the assessment and forecast of economic conditions. Lowering the OCR incentivises borrowing; raising the OCR incentivises saving.