Bank holds interest rates as expected, but pauses auctions of government debtpublished at 12:11 BST
12:11 BST
Faisal Islam
Economics editor
The Bank of England has kept interest rates at 3.75% as expected with a split of 6-3 to hold.
The Bank’s nine-member Monetary Policy Committee, on balance, has not seen the recent rise in energy prices pass through into wider inflationary pressures.
In a surprise move, the Bank of England has paused auctions of its remaining stock of £488 billion in government debt.
The Bank has put in place a long term plan to wind down the stockpile, built up during the financial crisis and Covid pandemic.
It has announced three notable moves, which require sign off from the Chancellor John Healey. First, £222bn long term debt held by the Bank will now be kept until it expires.
Second, £120bn of this will be kept permanently to back the Bank’s issuance of banknotes.
Lastly, the Bank will now not sell its government debt in the markets, but instead sell it effectively directly back to the government.
The net effect of all of this is that for now there will not be auctions in the markets, at a time of some painful rises in effective interest rates for governments. It might also help save some money in the short term for the public finances.
The Bank says the plan has been developed by it for the past year, based on winding down the emergency purchases of debt.