Bank of England expected to scale back QT, keep rates steady

The Bank of England looks set this week to slow the £100 billion-a-year pace at which it reduces its government bond holdings following increased volatility in bond markets, while keeping its main interest rate on hold.

- DAVID MILLIKEN

Although the central bank views the pace of quantitative tightening (QT) as having little impact on the wider economy, it is closely watched by financial markets, where some blame it for pushing up British government borrowing costs.

The BoE is alone among major central banks in conducting outright sales of the government bonds it bought to boost the economy in the years after the 2008 global financial crisis, rather than just letting them mature.

Since 2022, the BoE has reduced its gilt holdings from £875 billion ($1.2 trillion) to £558 billion, and for the past two years it has offloaded gilts at a pace of £100 billion a year. The BoE has given little away about its thinking, with Governor Andrew Bailey telling lawmakers earlier this month that the decision remained "open". But a Reuters poll showed economists expect the Monetary Policy Committee this week to slow the pace to a median £67.5 billion, a bigger drop than the fall to £72 billion in the Bank of England's own poll in August.