BoE Deputy Governor Cites Market Satisfaction with Quantitative Tightening Plan

Bank of England Deputy Governor Dave Ramsden expressed satisfaction with the market's response to the central bank's plan to sell down its £488 billion ($647 billion) gilt holdings over a multi-year period. The BoE aims to offload most of these gilts by 2034, selling them at a pace of £20 billion a year while keeping £120 billion of long-dated gilts to back banknote issuance.

Ramsden noted that the market reacted well to the plan, with gilt prices rallying sharply after the announcement, especially for longer-dated gilts. This led to lower yields, suggesting that the market was anticipating more quantitative tightening (QT) or a faster pace of QT than expected.

In his speech, Ramsden also reiterated the BoE's concern about inflation pressures and stated that interest rates may need to be raised if these pressures continue to build. He mentioned factors such as energy prices, extreme weather events, and cost pressures from artificial intelligence supply chains that would influence this decision.