BoE Holds Rate at 3.75%, Unwinds £368 Billion in Gilt Sales Plan

The Bank of England has decided to hold its interest rate at 3.75%, despite rising inflation expectations. In a unanimous decision, policymakers agreed to unwind the remaining £368 billion of gilts held for monetary-policy purposes by the end of 2034.

As part of this plan, the Bank will reduce its gilt stock by an average of £46 billion per year, combining £20 billion of annual sales with bonds that mature. A separate block of long-dated gilts worth £120 billion will be retained to back current and future banknote issuance.

The decision was widely anticipated, but the timing for unwinding the gilt stock has been new information for markets. Sterling's initial response was restrained, with a 0.1% fall against the US dollar in the first minute after the announcement.