Bank of England Faces Pressure to Halt Bond-Selling Program Amid Government Losses

The Bank of England is facing pressure to slow down its bond-selling program amid concerns that it will lead to significant losses for the UK government. Economists have urged Chancellor John Healey to intervene and prevent the Bank from selling off government bonds, known as gilts, at a rapid pace.

The Bank's quantitative tightening (QT) policy has seen it sell off billions of pounds' worth of gilts since 2022, reducing its holdings from £875bn to under £490bn. However, the bonds are now worth less than they were when bought, resulting in losses for the government.

The cost of government borrowing is already at multi-decade highs due to turmoil on financial markets caused by the Middle East conflict and rising oil prices. The yield on 10-year gilts has risen to 5.4%, its highest level since July 2007, while the 30-year gilt has reached 5.93%, a level not seen since March 1998.

Critics argue that the Bank's policy is causing more harm than good, with former deputy governor Charlie Bean stating that it is 'politically unsustainable' for the MPC to make decisions without Treasury involvement. Former chief economist John Llewellyn also expressed concerns, saying that there was no firewall between the Treasury and the central bank.