Why Economists Want the Bank of England to Slow Its Bond Sales

Economists have urged Chancellor John Healey to press the Bank of England to slow its bond-selling programme before the Bank decides the next stage of quantitative tightening.

The Monetary Policy Committee, the group that sets interest rates, was due to meet in the week of 15 September 2026. It had to set Bank Rate, the Bank's main interest rate, and decide whether to pause or slow gilt sales for the year ahead, according to The Guardian. Gilts are UK government bonds. The call links budget math to the Bank's balance-sheet policy. It does not call for an end to tightening.

On 14 September 2026, the yield on the 10-year gilt passed 5.4%, its highest level since July 2007. Yield is the effective borrowing cost. The 30-year yield rose to 5.93%, its highest since March 1998.

That move followed a choppy few months. In early September 2026, the 10-year borrowing cost hit 5.29%, its highest since 2008, before easing slightly. On 8 September 2026, the government paid its highest interest rate on a 30-year bond since 1998. That contrasts with January 2026, when the 10-year yield fell to 4.34% from 4.41%, the lowest since December 2024. In March 2026, borrowing costs rose above 5% in a global sell-off fuelled by the Iran war.

The bonds in question date to quantitative easing, when the Bank bought gilts to support the economy after the 2008 banking crash. Over the four years to September 2026, the Bank reversed that stance through quantitative tightening, selling debt back into the market.

Since active sales began in late 2022, the Bank cut its bond portfolio from a peak of £875bn to under £490bn by September 2026. In September 2025, it cut the annual target for gilt sales from £100bn to £70bn. At that September 2025 meeting, the Committee voted to reduce the stock held in the Asset Purchase Facility by £70 billion over the period starting October 2025. The Facility is the vehicle that holds the bonds. Its Quarterly Report for 2026 Q2 assumed a £70 billion reduction in the year to September 2026 through bonds that mature and bonds that are sold. As at close on 9 September 2026, the Bank reported the stock at £489,026 million on a settlement date basis in initial purchase proceeds.

The budget impact runs through an indemnity, a promise that the Treasury covers losses in the Facility. In August 2026, the Bank estimated tightening could lead to total losses of £120bn for the public purse if interest rates followed the path expected by financial markets. High yields threatened to wipe out at least half of the £24bn budget headroom Healey was expecting, according to The Guardian. Headroom is the spare capacity to borrow or spend while still meeting fiscal rules. An estimate on 1 September had put headroom at £13.8bn, down from £26bn in Rachel Reeves's spring forecast. Healey was scheduled to deliver his first budget as Chancellor in October 2026.

The institutional lines are tight. Governor Andrew Bailey told Parliament's Treasury Committee earlier in 2026 that it was not in the Committee's remit to limit costs to the government in the short term. Economists polled by Reuters in September 2026 unanimously predicted the Bank would hold rates steady in September, according to Reuters. That poll followed a September 2025 vote of 7-2 to keep Bank Rate at 4%. In early September 2026, the Bank's chief economist said the Bank must raise interest rates or risk losing market confidence. Economists had already urged the Bank in August to halt sales as borrowing costs climbed.

The broader context here is a collision between two tightening channels. Rate expectations set what the government pays on new borrowing. Active gilt sales add to the supply of longer-dated debt and lock in Facility losses paid by the Treasury. The practical question is whether a slower pace would ease that supply pressure without making the Bank look as if it is acting to help the budget.

Looking at what this means for October, the Committee's choice frames Healey's options. A pause or a further step down from £70bn would reduce near-term payments from the Treasury and supply to the market. It would leave bonds that mature to do more of the rundown. Holding at the current pace would keep shrinking the balance sheet at the same speed but keep pressure on long yields and headroom. Neither course changes the large stock that remains quickly.