BoE Holds Interest Rates at 4% and Reduces Gilt Sales to Lighten Market Stress

The Bank of England has opted to keep its base rate steady at 4%, while also easing off the accelerator on its quantitative tightening program by cutting down gilt sales from £100 billion to £70 billion annually. The move reflects concerns about swollen long-dated gilt yields that have been rattling the bond market.
In a 7-2 vote, the Monetary Policy Committee agreed on a revised gilt-sales strategy: 40% short-term, 40% medium-term, and only 20% long-term gilts. The shift toward shorter maturities is intended to reduce volatility in long-dated bond yields, which recently rose sharply.
Interestingly, two dissenters voiced alternative views—one member pushed for keeping QT at £100 billion while another argued for cutting to £62 billion to more aggressively ease the pressure on debt markets.
Inflation is expected to peak around 4% this month, before gradually cooling toward the BoE’s 2% target by the second quarter of 2027. Meanwhile, growth estimates for the third quarter were nudged up slightly. Governor Andrew Bailey cautioned that any loosening of policy must be gradual, given persistent inflation and uncertainty in global economic conditions.