Former policymakers from the Bank of England have recommended that Governor Andrew Bailey consider easing the government’s borrowing costs by revising the central bank’s bond-selling strategy. In the context of rising economic pressure, four ex-members of the Monetary Policy Committee (MPC) suggested that a shift in policy is necessary.
Currently, Britain faces its highest long-term borrowing costs in 27 years, which is placing additional strain on Chancellor Rachel Reeves ahead of her upcoming autumn budget scheduled for November 26. The Bank of England attributes these rising costs to external global factors, including influences stemming from the United States, while also acknowledging that its ongoing £100 billion bond sale program—a move to reverse previous quantitative easing measures—is contributing to the increase.
As the economic climate remains challenging, analysts predict the Bank will maintain its base interest rate at 4% during its next meeting. However, they also anticipate a potential adjustment in the bond-selling plans over the next year. Notably, Michael Saunders, a former MPC member, expressed concern about the current volatility in the gilt market, suggesting that increasing the pace of active sales could inadvertently drive yields even higher. Other ex-MPC members echoed this sentiment, emphasizing the need to reconsider the pace of bond disposals or halt them altogether.
The Bank has been gradually winding down its quantitative easing, shedding around £100 billion in bonds over the past year, with an existing portfolio of approximately £560 billion. Market expectations lean towards reducing the quantitative tightening program to around £70 billion in the coming year, which would still require sustaining active bond sales.
In light of these factors, adjustments to the Bank’s policies could alleviate pressure on long-term gilt yields, potentially benefiting government finances, although there are trade-offs involved, including reduced interest earnings from the gilt portfolio.
Source: https://www.theguardian.com/business/2025/sep/14/bank-of-england-urged-to-slow-bond-selling-plan-to-help-cut-record-uk-borrowing-costs