{"id":395464,"date":"2025-09-03T20:44:12","date_gmt":"2025-09-03T20:44:12","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/395464\/"},"modified":"2025-09-03T20:44:12","modified_gmt":"2025-09-03T20:44:12","slug":"bank-chief-warns-against-exaggerating-rise-in-uk-borrowing-costs-bank-of-england","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/395464\/","title":{"rendered":"Bank chief warns against \u2018exaggerating\u2019 rise in UK borrowing costs | Bank of England"},"content":{"rendered":"

The governor of the Bank of England<\/a> has cautioned against \u201cexaggerating\u201d the impact of a steep rise in the UK\u2019s long-term borrowing costs, which he said was part of a global trend.<\/p>\n

Andrew Bailey told MPs the Treasury had continued to borrow at the same interest rate for most of the year despite a rise in the rate on 30-year bonds to a 27-year high.<\/p>\n

Bailey\u2019s intervention will bring some relief to Rachel Reeves, who is under pressure from rising debt financing costs ahead of a budget which on Wednesday she set for 26 November<\/a>.<\/p>\n

The governor said the government\u2019s switch to borrowing over five or 10 years rather than 30 years meant its borrowing costs had remained flat this year, and commentators should not \u201cover-focus\u201d on the figure.<\/p>\n

\u201cThere is a lot of dramatic commentary on this but I wouldn\u2019t exaggerate the 30-year bond rate,\u201d he said. \u201cIt\u2019s a number that gets quoted a lot. It\u2019s quite a high number. It is actually not a number that is being used for funding at all at the moment.\u201d<\/p>\n

He said the increase in the yield on 30-year bonds<\/a> was governed largely by pension funds moving away from long-term financial products.<\/p>\n

\u201cYou have seen a steepening of yield curves across the whole developed world really \u2026 the underlying driver of this is global,\u201d he said.<\/p>\n

Yields are a measure of the interest rate that investors demand when lending to a government or company.<\/p>\n

Speaking to the Treasury select committee, Bailey also said there was \u201cconsiderably more doubt\u201d about when the Bank will be able to cut interest rates again.<\/p>\n

Bailey, who was in the narrow majority voting for last month\u2019s cut from 4.25% to 4%<\/a>, said: \u201cAlthough we\u2019ve taken a further step, and although I think that the path will continue to be downwards, gradually over time, because policy is still restrictive \u2026 there is now considerably more doubt about exactly when and how quickly we can make those further steps.\u201d<\/p>\n

He added: \u201cThat\u2019s the message I wanted to get across. Now I think actually, judging by what\u2019s happening to market pricing, I think that message has landed.\u201d<\/p>\n

A Reuters poll of economists last month showed a median expectation for a further rate cut before the end of this year and another quarter-point reduction in the first quarter of 2026.<\/p>\n

Since then, UK inflation has picked up to 3.8%, nearly double its target and the highest among the G7 advanced economies.<\/p>\n

Recent forecasts by the Bank show inflation reaching 4% later this month and not returning to 2% until the second quarter of 2027.<\/p>\n

Reacting to more recent data, financial markets expect the Bank to delay the next cut in the cost of borrowing to April 2026.<\/p>\n

Bailey\u2019s comments, which coincided with calmer trading on global bond markets and a fall in long-term yields, helped the pound rise against the dollar to $1.34, partially reversing falls earlier this week.<\/p>\n

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Stock markets across Europe also rose<\/a> as investors welcomed less jittery trading in the bond markets.<\/p>\n

In London, the FTSE 100 share index rose 61 points, or 0.67%, to 9,177, recovering most of Tuesday\u2019s 80-point fall. In Frankfurt, Germany\u2019s DAX gained 0.5%, while France\u2019s CAC jumped almost 1%.<\/p>\n

Asked by MPs about attacks on the Federal Reserve by Trump<\/a> in recent weeks, Bailey said he was \u201cvery concerned\u201d.<\/p>\n

He said: \u201cThis is a very serious situation and I am very concerned because the Federal Reserve is the central bank for the world\u2019s strongest economy \u2026 it has built up a very strong reputation for its independence and for its decision-making.\u201d<\/p>\n

The Bank chief said: \u201cMonetary stability and financial stability underpin the foundations of policy\u201d that enables governments to make political decisions.<\/p>\n

\u201cI think what we\u2019re now seeing is people saying we should be able to trade off the foundations for those other decisions, and I\u2019m afraid I just think that is a very dangerous road to go down<\/a>,\u201d he warned.<\/p>\n

\u201cThe job of an independent central bank is to provide those foundations, to take independent decisions to do it \u2026 that\u2019s how it works, that\u2019s how it should work.<\/p>\n

\u201cAnd so the threats to that I take very seriously.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The governor of the Bank of England has cautioned against \u201cexaggerating\u201d the impact of a steep rise in…\n","protected":false},"author":2,"featured_media":395465,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[51,16,15],"class_list":{"0":"post-395464","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-uk","10":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115142319366969005","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/395464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=395464"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/395464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/395465"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=395464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=395464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=395464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}