Former members of the Bank of England’s monetary policy committee (MPC) have called on governor Andrew Bailey to ease pressure on the government’s borrowing costs by scaling back or halting the central bank’s bond-selling programme.
Britain’s long-term borrowing costs have reached a 27-year high, adding pressure on chancellor Rachel Reeves ahead of her 26 November autumn budget. While global factors, including trade tensions and Federal Reserve policy, are partly responsible, the Bank acknowledged that its £100bn quantitative tightening (QT) programme, unwinding crisis-era bond purchases, is also contributing.
The Bank has sold around £100bn of gilts in the past year from its £895bn crisis-era portfolio, leaving £560bn in holdings. Investors expect the QT programme to be trimmed to about £70bn in the coming year, though fewer maturing gilts could keep active sales high unless adjusted.
Ex-MPC members, including Michael Saunders and Sushil Wadhwani, urged a slowdown or switch to passive QT, warning that continuing at the current pace could push yields higher and affect market confidence. Andrew Sentance added that scaling back would be sensible but stressed the Bank’s primary role is inflation control.
The IPPR thinktank estimates that halting active sales could save the Treasury more than £10bn annually, though holding bonds incurs some costs as the Bank earns less on gilt holdings than it pays on commercial bank reserves.
The Bank is expected to keep interest rates at 4% this week, potentially signalling a slower QT pace as markets await jobs and inflation data ahead of the autumn budget.
