Economists have urged Chancellor John Healey to press the Bank of England to slow its bond-selling programme. This programme has already cost the exchequer billions of pounds.
The Bank's Monetary Policy Committee (MPC) is scheduled to meet this week. Discussions will include not only the level of interest rates but also whether to freeze or slow the sale of government bonds, known as gilts.
These gilts were originally purchased as part of the rescue operation following the 2008 banking crash, a process known as quantitative easing (QE). Over the past four years, the Bank has been reversing this through quantitative tightening, selling the debt back to the market to help reduce inflationary pressures.
However, the current value of these bonds is lower, meaning their sale crystallises losses for the exchequer. This also increases market supply, which suppresses demand and pushes up the interest rate, or yield, on the debt.
The cost of government borrowing is at multi-decade highs. On Monday, the yield on the benchmark 10-year gilt reached over 5.4%, its highest since July 2007, while the 30-year gilt rose to 5.93%, the highest since March 1998.
In August, the Bank estimated that its quantitative tightening policy could result in total losses to the exchequer of £120bn if interest rates follow the path expected by financial markets. Governor Andrew Bailey has defended the policy, stating earlier this year that it is not within the MPC's remit to limit short-term government costs.
Bank officials have indicated that bond sales will continue, though potentially at a slower rate than anticipated earlier this year. A year ago, the Bank reduced its annual sales target from £100bn to £70bn and is expected to lower it again this week to £50bn.