Return of QE?

The BoE is keen that its recent gilt market intervention is seen as an operation to reduce strains in a particular market – not a reopening of Quantitative Easing! But like it or not, it will loosen monetary policy, at a time where Huw Pill (Chief Economist at the Bank of England) is talking up the chances of more rate hikes to dampen the inflation impact of the mini-Budget. The money market is still pricing in around 175 basis points of Bank hikes at the next MPC meeting in November – the yield curve is therefore very inverted, with short-dated yields higher than long-dated yields. Gilt sales from the Bank’s balance sheet – Quantitative Tightening, which were due to start next week – have been postponed until the end of October, although it still plans to sell £80 billion of gilts over the next year.