Bank of England Suspends Tightening Policy as Pound Nosedives — Central Bank to Start Purchasing Long-Dated UK Government Bonds – Economics Bitcoin News

The Bank of England decided to intervene on bond markets following the volatile European markets and the rapid drop in the pound and euro against the U.S. dollars over the last few days. The U.K.’s government bond yields are unpredictable and the sterling pound has fallen to a new low in relation to the greenback. On Wednesday, the Bank of England noted that it was monitoring the “significant repricing” of U.K. assets very closely.

Bank of England Opens the Stimulus Flood Gates Again — Central Bank Intervenes in UK Bond Markets

The Bank of England announced Wednesday that the Bank will temporarily purchase long-dated bonds. It also plans to suspend its recent quantitative tightening strategies. Two days ago, the U.K.’s native fiat currency, the pound sterling, slid to an all-time low against the U.S. dollar, and during the early morning (ET) trading sessions on Wednesday, the pound plummeted to 1.0541 nominal U.S. dollars per unit.

Bank of England Suspends Tightening Policy as Pound Nosedives — Central Bank to Start Purchasing Long-Dated UK Government Bonds
GBP/USD 1-hour chart on September 28, 2022, following the BOE’s statement on Wednesday.

In recent years, yields on U.K. Government bonds have risen dramatically and they are now experiencing the same volatility that U.S. Treasury Bonds. Yields in the U.K. saw the highest rise in yields since 1957. On Wednesday, the BOE stated that they were closely watching the situation. “Were dysfunction in this market to continue or worsen, there would be a material risk to U.K. financial stability,” the BOE said on Wednesday. The U.K. central banks added:

“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 U.K. households and businesses.”

The BOE’s actions follow a similar move by the Bank of Japan six days ago. Japan’s central bank made an intervention in foreign currency markets after the Japanese dollar fell to a 24 year low. The yen rebounded following the intervention, and on Wednesday, the pound sterling also rebounded against the greenback after the BOE’s announcement to begin temporary purchases of long-dated U.K. government bonds.

The pound trades at 1.0661 U.S. dollar per unit as of the writing. This is 0.61% less than the previous 24 hours. The BOE detailed that it plans to intervene “on whatever scale necessary” to “restore orderly market conditions.”

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How do you feel about the Bank of England’s intervention in U.K. bonds markets? What do you think about the pound’s performance against the U.S. dollar? Comment below and let us know how you feel about the subject.

Jamie Redman

Jamie Redman is the News Lead for News. He also lives in Florida and works as a journalist covering financial technology. Redman is an active participant in the cryptocurrency community from 2011. Redman is passionate about Bitcoin and open-source codes. Redman has contributed more than 6000 articles to News since September 2015. These articles are about disruptive protocols that are emerging.

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