BoE will not sell gilts into unstable markets, Bailey says

LONDON (Reuters) - Any future programme of bond sales from the Bank of England should be suspended during periods of market turbulence, BoE Governor Andrew Bailey said on Friday during a panel discussion hosted by the International Monetary Fund.

The BoE has said it will consider a programme of active sales from its more than 800 billion pounds ($1.03 trillion) of government bond holdings once it has raised its main interest rate to 1% -- an increase economists expect to occur on May 5.

"We can't have a constant ratchet upwards of central bank balance sheets and they never come down. They're a counter-cyclical tool, and we have got to manage them counter-cyclically," Bailey said.

"From my own perspective, we're always going to have to have ... a knockout clause which says we'll do it while we're in stable markets but we'll reserve the right to cease doing it if we see conditions change, because I think that's just, frankly, common sense," he added.

($1 = 0.7781 pounds)

(Reporting by David Milliken; Editing by William Schomberg)