(Bloomberg) -- Demand for cash from the Bank of England jumped to a record £12.2 billion ($15.3 billion) on Thursday, the latest in a string of increases that may spur policy makers to ease financial conditions through the bond market within months, analysts say.

The BOE will opt to end its weekly bond sales later this year, which will act in tandem with interest-rate cuts to loosen monetary policy, according to Deutsche Bank AG and NatWest Markets. 

Currently, banks are bidding for as much as £800 million of bonds from these sales each week, draining their spare liquidity and leading them to tap a short term BOE repo facility. Demand for cash in this BOE operation has been surging for weeks, with Thursday’s record smashing the previous high from last week of £7.6 billion.

The clamor has already driven up a short term money market rate to 5.35%, above the BOE’s benchmark rate. That has the effect of tightening financial conditions, just as the Monetary Policy Committee is considering easing policy by cutting interest rates.

“The BOE will cease active sales in Q4,” Deutsche’s Sanjay Raja said. “Should the MPC begin the process of normalizing rates from restrictive levels, the effects of active QT could add to a tightening in financial conditions — working against the Bank’s key monetary policy lever.”

Imogen Bachra, NatWest’s head of UK rates strategy, also thinks the level of demand for cash in the BOE’s weekly repo operations will help push policy makers to end active bond sales when they vote on the matter in September. The BOE’s current program is to reduce its stock of UK government bonds by £100 billion in the year to September.

Read more: BOE Estimates Losses on QE Will Cost UK Taxpayer £85 Billion

Continuing with the bond sales for longer than that would appear to run counter to policy efforts if the BOE moves to cut rates, as expected by money markets from August. Still, rate setter Megan Greene said last month that quantitative tightening could last for another year or more, while in November an official said it could still continue after rate cuts start.

The Federal Reserve is already one step ahead of the BOE, after announcing Wednesday it will shrink its balance sheet at a slower place beginning in June, reducing the amount of Treasuries it lets roll off every month, a step meant in part to ease potential strain on money-market rates. 

Read more: Fed to Slow Pace of Balance-Sheet Runoff Starting in June

The BOE’s weekly liquidity operation first started seeing significant usage in the latter half of last year, as sterling repo rates headed above the BOE’s bank rate, creating an arbitrage opportunity for banks. As excess liquidity dwindles, it’s likely to be used more frequently by banks in need of reserves.

“The deadline for deciding on the pace of quantitative tightening in the next year looms,” said Bachra.

--With assistance from Tom Rees.

(Updates throughout.)

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