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 slowing or halting its bond-selling programme. Britain’s long-term borrowing costs are at their highest level in 27 years, intensifying pressure on chancellor Rachel Reeves ahead of the 26 November autumn budget.
Threadneedle Street has cited global factors, including trade tensions and US Fed policy, but acknowledged that its £100bn quantitative tightening (QT) programme, unwinding crisis-era quantitative easing (QE), has contributed. The Bank is expected to hold its base rate at 4% this week, but could signal a slowdown in QT for the next 12 months.
Michael Saunders, former MPC member, said active sales should be reduced due to weak and volatile gilt markets, while Sushil Wadhwani called for a halt to active sales in favour of passive QT, noting the 30-year yield’s impact on economic confidence. Andrew Sentance agreed that scaling back to £70bn was sensible but cautioned against expecting a fiscal windfall.
The IPPR thinktank estimates halting active sales could save the Treasury over £10bn annually, though the Bank would earn less interest on its gilt holdings than it pays on commercial bank reserves. Analysts suggest that a slowdown in QT could help lower borrowing costs without compromising the Bank’s inflation mandate.
