![\"The](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/04\/Bank-of-England.jpg\")
\t\tAnalysts say the Bank of England has added to upward pressure on borrowing costs\t<\/p>\n\t\t\tThursday 07 May 2026 5:00 am
\n\t\t\t\t\t\u00a0|\u00a0\u00a0Updated:\u00a0<\/p>\n
\t\t\tWednesday 06 May 2026 7:09 pm\n\t<\/p>\n
\t\tAnalysts say the Bank of England has added to upward pressure on borrowing costs\t<\/p>\n
The Bank of England should slow the pace of its costly approach to unwinding quantitative easing, which is pushing up government borrowing costs and weakening the public finances at a time when both are under significant pressure, several top economists have said.<\/p>\n
The calls follow the UK\u2019s sovereign debt being swept up in a dramatic sell-off that carried the government\u2019s long-term borrowing costs to their highest level this century. Simultaneously, Bank of England officials published a fresh paper in which they raised their estimate for the total cost to the taxpayer of reversing the Bank\u2019s QE programme to \u00a3125bn.<\/a><\/p>\n The twin events reignited scrutiny on the central bank\u2019s unusual approach to offloading the government debt it acquired in the wake of the 2008 financial crisis, which has seen it actively sell much of the \u00a3875bn of government bonds back onto the market. <\/p>\n Under terms agreed by the Bank of England and then Chancellor George Osborne, the taxpayer is also responsible for covering the vast losses incurred by the process, which is known as quantitative tightening (QT), piling pressure on the public finances.<\/p>\n \u201cI would advocate for ending active QT,\u201d Simon French, chief economist at Panmure Liberum, told City AM.<\/p>\n \u201cIf you\u2019re looking at why UK gilt yields moved as an outlier, part of that story \u2013 albeit by no means all of it \u2013 is that we have chosen an approach to QT which\u2026 has made us an international outlier,\u201d he added.<\/p>\n Henry Cook, chief UK economist at MUFG, said that Bank of England officials should look to slow its pace of their bond sales when it next meets to discuss the programme in September.<\/p>\n \u201cThere is a strong case for further reducing the pace of QT at the next annual decision in September, irrespective of current market conditions,\u201d he said.<\/p>\n The pair\u2019s remarks echo an earlier demand from Carsten Jung, a director at the IPPR think tank, who called on the Bank to pause QT entirely. He told City AM on Tuesday<\/a>: \u201cActively selling government bonds is adding unnecessary pressure to the gilt market. It should stop \u2014 just as every other major central bank has.\u201d<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBank of England says quantitative easing programme to cost taxpayer \u00a3125bn<\/a><\/p>\n Since emerging from the coronavirus pandemic, almost every major central bank has sought to shrink its respective stockpile of bonds via QT. But both the fact that the British taxpayer is on the hook for programme\u2019s losses and the Bank\u2019s decision actively to sell gilts onto the bond market have made the UK an international outlier relative to peers. Both the European Central Bank and Federal Reserve opted to let their bonds mature without replacing them and swallowed any losses from the programme on their own balance sheets. In October, the Fed paused its QT efforts entirely.<\/a><\/p>\n Both Cook and French warned against any knee jerk change from the Bank of England, which they said would give the impression the central bank was bailing the Treasury out as it faced historically high borrowing costs.<\/p>\n Yields on the 30-year gilt rose 11 basis points on Tuesday to hit 5.76 per cent, while the 10-year note\u2019s interest rate surged 12 basis points, as the UK bond market was rocked by a wave of political uncertainty and inflation fears.<\/p>\n \u201cPolicymakers will\u2026 be wary of any perception that QT decisions are shaped by political considerations,\u201d Cook told City AM, \u201cwhich further strengthens the case for steady tapering rather than tinkering or abrupt changes in direction.\u201d<\/p>\n But higher borrowing costs will aggravate the overall cost of the programme, as bonds \u2013 whose prices moves inversely to their yields \u2013 will be sold onto the market at a greater loss.<\/p>\n \u201cThe higher yields go, obviously in very simplistic terms, the more selling assets off before they mature incurs a loss which is indemnified by the Treasury,\u201d French said. \u201cSo there\u2019s a fiscal implication to all this.\u201d<\/p>\n The Bank\u2019s Monetary Policy voted to\u00a0slow the pace of bond disposals<\/a>\u00a0from \u00a3100bn a year to \u00a370bn when it met in September 2025. But officials also opted to raise the amount of active sales \u2013 as opposed to passive maturities \u2013 from \u00a313bn to \u00a321bn.<\/p>\n Rate-setters, including governor Andrew Bailey, have previously played down concerns that their active QT programme was pushing up on the cost of government borrowing. Officials have also said that the Treasury is responsible for swallowing the losses because it benefited from the fiscal uplift from the original QE programme<\/a>.<\/p>\n \t\t\t\t\tRead more<\/p>\n![\"Andrew](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2026\/05\/andrew-bailey.jpg\")
Bank of England governor Andrew Bailey defended the central bank\u2019s approach to quantitative tighteningBank of England an outlier relative to peers<\/p>\n