Bank of England to Slow QT Programme Amid Soaring Mortgage Rates
The Bank of England is poised to reduce its quantitative tightening (QT) programme in response to soaring mortgage rates and record-high government bond yields. The central bank will vote on Thursday to slow down the pace of its £70bn QT programme, with economists predicting a reduction to £50bn.
Additionally, the Bank may choose to halt sales of long-dated bonds, which have been pushing up borrowing costs. Critics argue that the current approach has made the UK an outlier among its international peers and is adding unnecessary pressure on the country's public finances.
Economists at Deutsche Bank believe a reduction in the annual QT envelope to £50bn remains their base case, while Thomas Pugh from RSM UK agrees that the MPC will choose to reduce or pause long-dated gilt sales.
The move comes as the UK's long-term government debt continues to face a historic sell-off, with yields on 10-year and 30-year gilts climbing to multi-decade highs. At an auction last week, the government was forced to pay an interest rate of 5.82% for 30-year debt, the highest rate since 1998.