central bank United kingdom It appears to be preparing to take its first steps next week towards selling some of the 875 billion pounds – about $1.11 trillion – of government bonds it accumulated between 2009 and 2021, which would take markets into uncharted territory.
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Investors believe the Bank of England (BoE), in its quest to prevent the recent spike in inflation from becoming a long-term problem, will raise its key interest rate to 1% on May 5, a level it has said it would consider “initiating” an active bond sale.
The big question for the markets is when these sales will start. Analysts’ estimates range from June of this year to 2023.
The Bank of England said in February that it would stop reinvesting maturing debt proceeds, repeating the US central bank’s moves in 2017 and 2018.
A reduction in bond holdings has the potential to increase borrowing costs throughout the economy, which will reduce inflation but also slow growth, the opposite of the quantitative easing that most Western central banks have done since the financial crisis. 2008
No other major central bank has embarked on a similar active sell-off.
Sanjay Raja, chief UK economist at Deutsche Bank, expects gold sales to start in August or September and reach around £3.3 billion per month over 2022 and 2023.
Bank of America expects the Bank of England to start bond sales in June and initially sell £5 billion in bonds per month and raise it to £9 billion from November.
NatWest Markets strategist Imogen Bachra said the central bank may prefer to assess the impact of interest rate adjustments and slower growth before announcing in November a program of around £50 billion in 2023 gold bonds.
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