Question mark over start of ‘quantitative tightening’ as prime minister plans to borrow billions
Bank of England governor Andrew Bailey speaks during a presentation of the central bank’s financial stability report in London on August 4. Picture: REUTERS/YUI MOK
“The arguments for a 75 basis point move are more compelling than those for a 50 bps increase,” Paul Hollingsworth, chief European economist at BNP Paribas, wrote in a note to clients. The BOE had planned to endorse so-called quantitative tightening, where bonds from the asset portfolio will be sold, but Truss’s decision to borrow huge sums to head off a winter spike in energy costs has introduced an element of doubt.
On Friday, sterling marked the 30th anniversary of Black Wednesday — September 16 1992 — by falling below $1.14 for the first time since 1985. UK government bonds have also underperformed peers recently, with 10-year yields climbing as high as 3.22% last week, the highest in more than a decade.
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