Ramsden Hails Market Reaction to BoE's Quantitative Tightening Plan

Bank of England Deputy Governor Dave Ramsden stated that markets have reacted positively to the central bank's plan to sell down its £488 billion gilt holdings by 2034. The BoE announced earlier this month that it would offload most of its gilts at a pace of £20 billion per year, allowing shorter-dated debt to mature while keeping £120 billion of long-dated gilts to back banknote issuance.

Ramsden noted that gilt prices rallied sharply after the announcement, especially for longer-dated gilts, pushing down yields. He suggested that this reaction indicates the market was expecting more quantitative tightening or at a higher pace than anticipated.

The BoE's plan aims to reduce its debt holdings and lower borrowing costs in the long term. However, Ramsden also repeated his view from September's policy decision that the central bank may need to raise interest rates if inflation pressures build, citing factors such as energy prices, extreme weather events, and cost pressures from the artificial intelligence supply chain.