BoE's Bond Sale Plan Wins Market Approval, Inflation Risks Loom

The Bank of England's Deputy Governor Dave Ramsden expressed satisfaction with the market reaction to the central bank's plan to sell down its bond portfolio over the next decade. The BoE aims to offload most of its £488 billion of gilt holdings by 2034, selling gilts at a pace of £20 billion per year.

Ramsden noted that gilt prices rallied sharply after the announcement, especially for longer-dated gilts, pushing down yields. He attributed this reaction to the market having expected more quantitative tightening or a higher pace of it than what was announced.

The Deputy Governor also repeated his view on inflation pressures, stating that the BoE may need to raise interest rates if these pressures build. This is in line with his previous comments in minutes of September's policy decision.