Bank of England urged to slow or halt bond-selling to slash UK borrowing costs
Source: Guardian Econ ↗ (cross-verified by 2 outlets — full list below)
Economists are urging Chancellor John Healey to press the Bank of England to slow or halt its ongoing programme of selling government bonds, known as gilts, which they say is costing the exchequer billions of pounds. The Bank’s Monetary Policy Committee is set to meet this week to decide not only on interest‑rate levels but also on whether to freeze or reduce the pace of “quantitative tightening” (QT), the reversal of the post‑2008 quantitative easing (QE) that involved buying large amounts of gilts. As the Bank sells these bonds back to the market, their value—now lower than when purchased—creates realised losses for the Treasury and adds supply to the gilt market, suppressing demand and pushing yields higher. Benchmark yields have already surged, with the 10‑year gilt exceeding 5.4%—its highest since July 2007—and the 30‑year reaching 5.93%, a peak not seen since March 1998. The Bank has estimated that, if interest rates follow current market expectations, QT could generate total losses of about £120 billion for the exchequer.
The core of the criticism centres on the fiscal impact of the bond‑selling strategy and its interaction with broader economic pressures, notably the rise in oil prices driven by Middle‑East conflict, which has already lifted borrowing costs to multi‑decade highs. Since late 2022 the Bank has dramatically reduced its gilt holdings, cutting the portfolio from a peak of £875 billion to under £490 billion, and has lowered its annual sales target from £100 billion to £70 billion a year, with a further reduction to £50 billion expected at this week’s meeting. Analysts such as Christopher Mahon argue that the Bank’s approach is far more costly than comparable programmes at the European Central Bank or the U.S. Federal Reserve, citing the poor performance of the specific bonds bought after 2008. The Office for Budget Responsibility projects that active gilt sales could add roughly £47 billion to government debt by 2031, assuming annual sales of £32 billion.
Bank Governor Andrew Bailey has defended the policy, stating that limiting short‑term Treasury costs falls outside the MPC’s remit, while Treasury officials have begun drafting plans with the Debt Management Office to overhaul the money‑printing programme, including a reported decision to stop selling 20‑ and 30‑year gilts bought under QT. Former Bank deputy governor Charlie Bean and former OECD chief economist John Llewellyn have both warned that the current separation between the Treasury and the central bank is a “fiction” and that political pressure may force the Bank to negotiate with the Chancellor to mitigate fiscal spillovers. Healey, however, has so far resisted internal cabinet calls for a hard line, preferring assurances that the Bank will be mindful of the Treasury’s losses as he prepares his first budget next month. The outcome of the upcoming MPC meeting will shape the trajectory of UK borrowing costs and the Treasury’s fiscal outlook in the years ahead.
⚡ Effects Interpreter
🌍World Economylow impact
What this means for you
- ▶Bond markets might gradually reprice risk once this news circulates.
- ▶Share prices around the world might swing as traders weigh this up.
🏙️Local Economylow impact
What this means for you
- ▶Everyday costs in your town might drift as the wider economy reacts.
- ▶High street footfall and spending can shift subtly after a story like this.
🏦Rates & Bankslow impact
What this means for you
- ▶Mortgage offers could firm up or soften as the picture becomes clearer.
- ▶A sudden leap in mortgage costs from this alone would be out of character for lenders.
❤️Healthmedium impact
What this means for you
- ▶Health anxieties triggered by this kind of news usually ease once facts replace speculation.
- ▶Unsettling news can weigh on sleep and mood, so peace of mind matters.
💷Wealthmedium impact
What this means for you
- ▶Oil, gold and other commodities typically twitch within hours of news like this.
- ▶Traders' mood can move your investments before the week is out.
🏠Housinglow impact
What this means for you
- ▶Estate agents typically say the market takes weeks to catch up with news.
- ▶First-time buyers might keep half an eye on mortgage rates after this.
🌍 Effects for your country
The U.S.'s central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The U.S.'s economy is growing at 2.3% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the U.S.'s own central bank rate closely. With the U.S.'s unemployment at 4.4%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the U.S. depends more on local healthcare capacity than the figures above.
The UK's central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The UK's economy is growing at 0.8% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UK's own central bank rate closely. With the UK's unemployment at 5.6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the UK depends more on local healthcare capacity than the figures above.
France's central bank rate currently stands at 2%, so a global rates move like this could feed through to local borrowing costs. France's economy is growing at 0.9% with inflation at 1.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track France's own central bank rate closely. With France's unemployment at 7.9%, personal-finance effects like this land on a labour market that is already under strain. Health-system effects are harder to localise from economic indicators alone — the real impact in France depends more on local healthcare capacity than the figures above.
Romania's central bank rate currently stands at 6.5%, so a global rates move like this could feed through to local borrowing costs. Romania's economy is growing at 0.7% with inflation at 7.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track Romania's own central bank rate closely. With Romania's unemployment at 6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in Romania depends more on local healthcare capacity than the figures above.
The UAE's central bank rate currently stands at 3.65%, so a global rates move like this could feed through to local borrowing costs. The UAE's economy is growing at 3.1% with inflation at 2.5%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UAE's own central bank rate closely. Health-system effects are harder to localise from economic indicators alone — the real impact in the UAE depends more on local healthcare capacity than the figures above.