In an attempt to stabilize the bond market, the bank announced a two-week purchase program for long-dated bonds and delayed its planned gilt sales until the end of October. This is known as quantitative easing.
The move came after a massive sell-off in UK Government bonds — known as “gilts” — following the new government’s fiscal policy announcements last Friday. The policies included unfunded tax cuts that have drawn global criticism, and also saw the pound fall to an all-time low against the dollar on Monday.
Central to the bank’s extraordinary announcement was panic among pension funds, with some of the bonds held within them losing around half their value in a matter of days. The bank of England’s emergency move begs the question… Is this quantitative easing in the UK unique or does it foreshadow a US federal reserve that is close to backing down from its inflation fight?