- The Bank of England has announced that it will buy government bonds on a temporary basis to “restore orderly market conditions”
- The intervention comes as financial leaders react to the International Monetary Fund’s criticism of the UK’s tax-cut plan
- The BoE says it wants to prevent a “material risk to financial stability” arising from market turmoil after Friday’s mini-budget.
Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown:
“The Bank of England is now pursuing a topsy turvy set of policies, unleashing a fresh bond buying spree to try and bring down punishing rates – while at the same time still signalling it will aggressively hike interest rates to try and rein in runaway inflation. This shows what a bind the bank is currently in. It knows ultra-high bond yields will cause a ricochet of problems for companies and consumers and potentially cause instability in the housing market but it’s also very worried that the tax cutting spree will could cause inflation to rise to dangerous levels.
The move that bank officials have made to step in now, just two days after it indicated it would wait until November, smacks of a bit of panic and also of frustration that the government appears to be digging in its heels, reluctant to perform a political U-turn. Instead, the Bank of England has been forced to pursue a monetary U-turn, an abrupt change of policy as the Bank’s monetary policy committee had been pursuing a policy of selling down the Bank’s bond holdings.”
