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2025-09-15 13:30:34
Bank of England's gilt decision could leave Chancellor facing a £4 billion funding gap. If the Bank of England halts its active sales of gilts at a key decision this week, Chancellor of the Exchequer Reeves will need to raise an additional £4 billion ($5.4 billion) to keep her budget on track. In addition to Thursday's interest rate decision, the Bank of England will also announce the pace of reduction in its crisis-era quantitative easing bond portfolio over the next 12 months—a potentially daunting challenge for Reeves as he prepares to deliver the budget on November 26. Since the Bank of England's gilt holdings are currently losing money, a decision to slow the pace of reduction would increase the burden on British taxpayers. This would be a significant blow to Reeves, who already needs to raise £35 billion after rising borrowing costs, a weak growth outlook, and a series of sharp policy shifts that have depleted fiscal buffers. The Bank of England faces a dilemma: balancing the fiscal costs of slowing gilt sales with the risk of exacerbating financial market instability by continuing to ask investors for large-scale bond purchases. This month, the yield on 30-year gilts hit its highest level since 1998.
