Former Bank of England policymakers have urged Governor Andrew Bailey to scale back or halt the central bank's bond-selling programme, known as quantitative tightening (QT), to ease pressure on the government's borrowing costs. Four ex-members of the Monetary Policy Committee (MPC) said a change in course was needed as UK long-term borrowing costs hit a 27-year high, intensifying pressure on Chancellor Rachel Reeves ahead of her autumn budget on 26 November.
The Bank has been selling bonds from its £895bn quantitative easing portfolio, shedding about £100bn over the past year through active sales and allowing maturing debt to expire. However, it admitted last month that the programme is contributing to rising gilt yields, alongside global factors such as Donald Trump's trade war and attacks on US Federal Reserve independence. The Bank still holds about £560bn in bonds, having sold most at a loss.
Michael Saunders, a former MPC member now at Oxford Economics, said it was 'highly likely' the Bank would slow the pace of sales amid volatile markets. 'Current conditions are such that a higher pace of active sales might have an undesirable effect on pushing up yields further,' he said. Another ex-MPC member, speaking anonymously, said reducing QT was essential: 'Not reducing it would be completely tone deaf to what’s happening in the global bond markets.'
Sushil Wadhwani, who served on the MPC from 1999 to 2002, called for an outright halt to active sales, arguing that the 30-year gilt yield significantly impacts confidence in the UK economy. He said foreign investors frequently raise the issue. Andrew Sentance, another former MPC member, said cutting QT to about £70bn was sensible but warned the chancellor not to rely on any windfall, as the Bank's primary job is controlling inflation.
City investors expect the Bank to scale back QT to around £70bn for the coming year, maintaining active sales at current levels due to fewer gilts maturing. Scaling back could save the Treasury up to £10bn annually, as the Bank sells bonds at a loss. The Bank is widely expected to keep its base rate at 4% on Thursday but may signal a slowdown in bond sales.
In a rare piece of positive news, a survey by Make UK showed an upturn in manufacturing output and export orders in the third quarter. Chief Executive Stephen Phipson said indicators had improved but cautioned: 'One swallow doesn’t make a summer, and with UK and European markets remaining anaemic it wouldn’t take much to knock prospects for further growth.'
