Former Bank of England policymakers have urged governor Andrew Bailey to ease pressure on the government’s borrowing costs by scaling back or halting the central bank’s bond-selling programme. Four ex-members of the Bank’s monetary policy committee (MPC) called for a change as Britain’s long-term borrowing costs hit a 27-year high, intensifying pressure on Chancellor Rachel Reeves ahead of her 26 November budget.
While global factors such as Donald Trump’s trade war have driven yields higher, the Bank acknowledged that its £100bn programme to unwind crisis-era quantitative easing (QE) is also contributing. Active bond sales and allowing maturing debt to expire—a process known as quantitative tightening (QT)—have reduced the Bank’s holdings from £895bn to around £560bn.
Ex-MPC members, including Michael Saunders and Sushil Wadhwani, recommended slowing or halting active sales to prevent further upward pressure on gilt yields. Andrew Sentance said trimming QT to £70bn would be sensible but stressed the Bank’s priority is controlling inflation, not easing fiscal pressures.
Scaling back QT could help reduce long-term borrowing costs and save the Treasury money, as recent bond sales have been made at a loss. The IPPR thinktank estimates halting active sales could save more than £10bn a year, though holding bonds is not cost-free because interest earned is less than what the Bank pays on commercial bank reserves.
The Bank is expected to keep interest rates at 4% this week while signaling a potential slowdown in QT amid market volatility, with upcoming jobs and inflation data adding to the economic backdrop.
