The Bank of England is likely to slow its approach to offloading gilts, according to economists. This follows the Bank's concession that its current strategy has increased borrowing costs, at a time when government bond yields are near record highs.
The Monetary Policy Committee is expected to vote to reduce the pace of its 'quantitative tightening' programme from £70bn to £50bn. Several economists also suggest the Bank could halt sales of long-dated bonds when it meets on Thursday.
This potential decision comes after calls for the Bank to pause active sales of its bond portfolio. Critics have argued that actively selling bonds into the market, rather than allowing them to mature, has pushed up borrowing costs and added pressure to public finances.
Deutsche Bank economists Maui Brennan and Sanjay Raja stated that a reduction in the annual quantitative tightening envelope to £50bn remains their base case, adding they believe the Bank could scrap long gilt sales entirely. Thomas Pugh, chief economist at RSM UK, also agreed the MPC would likely reduce or pause longer-dated gilt sales.
The Bank of England previously estimated its quantitative tightening stance had added 30 basis points, or a third of a per cent, to 10-year gilt yields. The decision on Thursday will determine the course for the Bank of England's quantitative tightening for the next 12 months, as officials vote on the pace and nature of bond sales once a year.