The Bank of England has launched emergency action in an attempt to stave off a “material risk to UK financial stability”.
The Bank has started an emergency UK Government bond-buying programme to prevent borrowing costs from spiralling out of control.
The BoE announced it was stepping in to buy government bonds at an “urgent pace” after fears over the Government’s economic policies sent the pound tumbling.
The Bank has this morning announced a gilt market operation. Full details can be found here: https://t.co/BvqFe9DZMp
— Bank of England (@bankofengland) September 28, 2022
The Bank said: “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability.
“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.
“In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.”
The Treasury responded by reaffirming its commitment to the Bank of England’s independence and said the Government “will continue to work closely with the Bank in support of its financial stability and inflation objectives”.
It said the bond-buying programme would be temporary, starting from today until October 14.
“The purpose of these purchases will be to restore orderly market conditions,” the Bank said.
It comes amid warning pension funds could be affected as the British pound plummets.
I'm told:
— Sam Coates Sky (@SamCoatesSky) September 28, 2022
- Pension funds getting hammered and losing huge amounts of capital
- Banks forcing them to make margin calls and liquidate assets - so gilts
- Some pension funds losing large amounts of their fund
- Hence BoE stepped in
/
Sam Coates, Deputy Political Editor at Sky News, warned: "I'm told: - Pension funds getting hammered and losing huge amounts of capital - Banks forcing them to make margin calls and liquidate assets - so gilts - Some pension funds losing large amounts of their fund - Hence BoE stepped in."
He added: "They are worried about systemic risk and without move today some pension funds could have gone under (they still might) - There’s a global bond rout going on "so probably the worst time in recent history to make unfunded pledges" says a source."
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