Former Bank of England policymakers have called on governor Andrew Bailey to scale back or halt the central bank’s bond-selling programme, warning it is pushing up government borrowing costs. Four ex-members of the Bank’s monetary policy committee (MPC) said Britain’s long-term gilt yields, now at a 27-year high, are intensifying pressure on chancellor Rachel Reeves ahead of her 26 November autumn budget.
While global factors such as trade tensions and US Federal Reserve policy contribute, the Bank has acknowledged its £100bn programme of quantitative tightening (QT) is adding to the strain. Since last year, the Bank has sold around £100bn of its £895bn crisis-era portfolio, leaving holdings of about £560bn, mostly sold at a loss.
Michael Saunders, former MPC member, said the pace of sales risks pushing yields higher, while Sushil Wadhwani called for active sales to halt, favoring passive QT instead. Andrew Sentance agreed scaling back to around £70bn would be sensible but stressed the Bank’s priority remains inflation control.
Reducing QT could ease gilt yields and save the Treasury money, with the IPPR thinktank estimating a potential £10bn annual saving. However, holding bonds is not cost-free, as interest earned on gilts is lower than the rate paid on commercial bank reserves.
The Bank is widely expected to maintain the base rate at 4% this week but may signal a slowdown in bond sales amid upcoming jobs and inflation data ahead of the autumn budget.
