The Bank of England has also voted to slow the pace of its bond selling programme, as well as leaving interest rates on hold. At this week’s meeting, the Bank’s monetary policy committee has decided to unwind its quantitative tightening programme at an annual average pace of £46bn by the end of 2034. That will be conducted through annual sales of £20bn, plus £26bn per year of gilts which mature.
That’s down from a previous QT pace of £70bn, and a slightly larger slowdown than expected (the City had expected QT to be slowed to £50bn). Today’s decision follows criticism that QT has been pushing up government borrowing costs, because the Bank’s sale of gilts increases the yield on government debt. The Bank also makes a loss on the sale, which lands on the taxpayer.
The Bank currently holds £488bn of gilts through its asset purchase programme (created after the financial crisis), which bought debt with newly created money. It has decided to set aside £120bn of bonds to back the issuance of banknotes, and wind down the remaining £368bn by the end of 2034.
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