Today, the Bank of England (BoE) is set to announce its latest monetary policy decision at noon UK time. The central bank is widely expected to maintain the Bank Rate at 4%, following recent inflation figures that showed a troubling rate of 3.8%, significantly above the target.
The focus among economists will be whether the BoE alters its quantitative tightening (QT) bond-selling program. This program involves the selling of government bonds acquired during the financial crisis and the COVID-19 pandemic. Critics have noted that this QT approach has led to higher borrowing costs, primarily because the selling activity has negatively impacted bond prices, causing yields to rise.
The annual assessment of the QT program is anticipated today, with many economists predicting a moderation in the pace of bond sales, lowering the reduction of gilts from £100 billion to approximately £72 billion. A deceleration in gilt sales would potentially relieve some pressure on elevated gilt yields, which recently reached a 27-year high. This adjustment could provide Chancellor Rachel Reeves with more flexibility in her upcoming budget discussions.
Various experts have shared their insights regarding the BoE’s likely decisions. Andrew Wishart, a senior UK economist at Berenberg, believes there will be no change in interest rates today and anticipates a shift in the QT pace. Kathleen Brooks from XTB cautioned that while reducing QT might be beneficial, it carries inherent risks, particularly concerning the shrinking value of bonds on the BoE’s balance sheet.
As the situation unfolds, interest will also center on related economic data due later in the day, including US weekly jobless claims data.
Source: https://www.theguardian.com/business/live/2025/sep/18/bank-of-england-uk-interest-rates-bond-selling-qt-programme-andrew-bailey-business-live