The Bank of England (BoE) slowed its bond-holding reduction (QT) for the first time since 2022, targeting £70 billion of redemptions between Oct 2025–Sep 2026 (from £100 billion previously) and changed the composition of sales to 40% short-term, 40% medium-term, 20% long-term to ease pressure on the volatile gilt market. The move comes after 30-year gilt yields hit their highest since 1998.
On the policy rate front, the MPC voted 7-2 to keep rates at 4% after a 25 basis point cut last month. The pound fell and 30-year gilt yields edged lower following the decision. Markets raised the probability of an additional rate cut this year from ~32% to ~37% following the announcement.
The BoE forecast maintained its expectation that inflation would peak at 4% this month and return to its 2% target in the second quarter of 2027. The third quarter growth forecast was slightly raised to 0.4% from 0.3%. Governor Andrew Bailey stressed that any further cuts would need to be gradual and cautious.
Within the MPC, there were differences of opinion on the QT rate with Huw Pill wanting to keep it at £100 billion while Catherine Mann wanted a faster reduction. Analysts see the BoE’s change of pace and mix of gilt sales as potentially providing some relief to markets ahead of Chancellor of the Exchequer Rachel Reeves’ Budget on November 26, but the direction of the rate still depends on inflation and growth data.
