The Bank of England announced a significant change to its quantitative tightening (QT) programme on Thursday, proposing to sell its government bonds, known as gilts, directly to the Treasury. This new approach would replace the current method of selling bonds to private-sector buyers.
Chancellor John Healey is expected to make a final decision on this proposal in April, and until then, the QT programme will be paused. The Treasury's debt management office (DMO) would then issue new bonds to cover the costs of those purchased from the Bank, allowing for tailoring of gilt sales to market demand.
The Bank's monetary policy committee (MPC) had already been slowing down its QT, having reduced its gilt stock by £70bn this year through sales and maturities. The Bank aims to avoid destabilising bond markets, which have been volatile globally. Analysts anticipate a modest impact on public finances, potentially allowing the Treasury to finance borrowing more cheaply.