Why is the BoE doing this now?
Posted: November 16th, 2023, 10:45 pm
https://www.telegraph.co.uk/business/20 ... and-bonds/
Bank’s decision to sell bonds at a time when prices are potentially at their lowest adding to the losses
The Bank of England’s decision to sell-off government bonds is costing taxpayers £15bn a year and squeezing Jeremy Hunt’s room to cut taxes, a top investment bank has warned. Deutsche Bank said Threadneedle Street’s decision to reduce the size of its balance sheet by actively selling gilts bought during the pandemic, rather than letting them mature, meant taxpayers faced much heavier losses in the short term. Based on the current path of interest rates, taxpayers face £15bn-a year in extra losses compared to a scenario where the bonds just matured. The Treasury is on the hook to make the Bank whole on any losses from the bond-buying programme, known as quantitative easing (QE).
Sir John Redwood urged the Bank to stop actively selling bonds. He said: “They’re making a double mistake having given us inflation with too much quantitative easing (QE). Now they’re giving us too much austerity by doing too much QT, forcing interest rates too high and suffering heavier losses. “The Treasury, which is having to pay all these losses that we need not take, are then in no mood for tax cuts because they’re having sent so much money to the Bank of England.”
Bank’s decision to sell bonds at a time when prices are potentially at their lowest adding to the losses
The Bank of England’s decision to sell-off government bonds is costing taxpayers £15bn a year and squeezing Jeremy Hunt’s room to cut taxes, a top investment bank has warned. Deutsche Bank said Threadneedle Street’s decision to reduce the size of its balance sheet by actively selling gilts bought during the pandemic, rather than letting them mature, meant taxpayers faced much heavier losses in the short term. Based on the current path of interest rates, taxpayers face £15bn-a year in extra losses compared to a scenario where the bonds just matured. The Treasury is on the hook to make the Bank whole on any losses from the bond-buying programme, known as quantitative easing (QE).
Sir John Redwood urged the Bank to stop actively selling bonds. He said: “They’re making a double mistake having given us inflation with too much quantitative easing (QE). Now they’re giving us too much austerity by doing too much QT, forcing interest rates too high and suffering heavier losses. “The Treasury, which is having to pay all these losses that we need not take, are then in no mood for tax cuts because they’re having sent so much money to the Bank of England.”