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MNI BRIEF: Latest Long Bond Buys Not MonPol Move - BOE Pill

(MNI) London
(MNI) London

The Bank of England's decision to buy long dated gilts, unveiled Wednesday, is not a form of yield curve control or a relaunch of quantitative easing but instead a temporary move designed only to avoid contagion and dysfunction at the long-end of the gilt market, Chief Economist Huw Pill said Thursday.

Long dated gilt prices had surged following the fiscal easing in the mini-Budget with margin calls lead to spiraling price rises before the BOE stepped in. Pill said that the "Bank is preventing a self-sustaining vicious spiral of collateral calls, forced sales and disappearing liquidity from emerging in a core segment of the financial markets" but that this was purely for financial stability reasons.

He restated his line that the monetary policy response will only come in November, when the full forecast round is completed, and that with the Budget pushing up on demand "it is hard to avoid the conclusion that the fiscal easing announced last week will prompt a significant and necessary monetary policy response."

The Treasury Select Committee on Thursday called on Chancellor Kwasi Kwarteng to bring forward the date of the Budget and full fiscal forecast to end of October at latest, so that the Bank can factor it into its November decision.

MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com
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MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com
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