BoE's Ramsden Hails Market Reaction to Bond Sale Plans

The Bank of England's Deputy Governor Dave Ramsden has expressed satisfaction with the market reaction to its plan to sell down its £488 billion bond portfolio over a period of several years. The bank aims to offload most of its gilts by 2034, selling £20 billion worth annually while keeping £120 billion of long-dated gilts to back banknote issuance.

Ramsden said the market has reacted well to the plan, with gilt prices rallying sharply after the announcement. He noted that this could be due to the removal of uncertainty about the path of future quantitative tightening or the expectation of more QT than initially anticipated.

In a speech to London's Money Macro and Finance Society, Ramsden also repeated his previous view that the Bank of England may need to raise interest rates if inflation pressures continue to build. He cited energy prices, extreme weather events, cost pressures from the artificial intelligence supply chain, domestic food prices, and wage negotiations as factors he would assess in making this decision.

The BoE has not increased interest rates since the start of the Iran war, partly due to its policy stance already being restrictive.