Bank of England urged to slow or halt bond-selling to slash UK borrowing costs
Summary
Economists are asking the UK Chancellor, John Healey, to slow or stop the Bank of England’s sale of government bonds to reduce the rising cost of UK borrowing. The Bank has been selling bonds to fight inflation but this has caused losses for the government and pushed up interest rates on debt.Key Facts
- The Bank of England is selling government bonds (gilts) to reduce inflation, a process called quantitative tightening.
- Selling bonds when their value is lower causes losses for the UK government.
- Higher bond sales increase supply and push up the interest rates (yields) on government debt.
- UK borrowing costs are at their highest in decades, partly due to the Middle East conflict raising oil prices.
- The Bank’s bond sales reduced its holdings from £875 billion to under £490 billion since 2022.
- The Bank cut its bond sale targets from £100 billion to £50 billion a year but plans to continue selling bonds.
- Some experts say the Bank should stop selling bonds actively to avoid more government losses.
- The Bank of England’s bond-selling program is more costly than similar programs in Europe and the US.
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