.webp)
2m ago
12.32
The pound continues to lurch lower and is now worth
$1.0549, a 1.7% drop on the day. On Monday, it hit an all-time low of $1.0327
against the dollar.
The dollar
has strengthened against all major currencies and hit a 20-year high today, as
it is generally regarded as a safer investment in turbulent times, and the US
central bank has raised interest rates aggressively, giving investors a better
return on their assets.
By
comparison, the euro is down 0.38% against the dollar.
From 1h ago
11.11
Bank of England intervenes in bond market
The Bank of
England says it will intervene in bond markets to try and stabilise them, after
the recent selloff. It will start buying long-dated gilts from today to
“restore orderly market conditions” and stave off a “material risk to UK
financial stability”. Here’s the full statement:
As the
governor said in his statement on Monday, the Bank is monitoring developments
in financial markets very closely in light of the significant repricing of UK
and global financial assets. This repricing has become more significant in the
past day – and it is particularly affecting long-dated UK government debt. 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.
To achieve
this, the Bank will carry out temporary purchases of long-dated UK government
bonds from 28 September. The purpose of these purchases will be to restore
orderly market conditions. The purchases will be carried out on whatever scale
is necessary to effect this outcome. The operation will be fully indemnified by
HM Treasury.
On 28
September, the Bank of England’s financial policy committee noted the risks to
UK financial stability from dysfunction in the gilt market. It recommended that
action be taken, and welcomed the Bank’s plans for temporary and targeted
purchases in the gilt market on financial stability grounds at an urgent pace.
These purchases will be strictly time limited. They are intended to tackle a
specific problem in the long-dated government bond market.
Auctions
will take place from today until 14 October. The purchases will be unwound in a
smooth and orderly fashion once risks to market functioning are judged to have
subsided. The monetary policy committee has been informed of these temporary
and targeted financial stability operations.
This is in
line with the Concordat governing the MPC’s engagement with the Bank’s
Executive regarding balance sheet operations. As set out in the Governor’s
statement on Monday, the MPC will make a full assessment of recent
macroeconomic developments at its next scheduled meeting and act accordingly.
The MPC will not hesitate to change interest rates by as much as needed to
return inflation to the 2% target sustainably in the medium term, in line with
its remit.
The MPC’s
annual target of an £80bn stock reduction is unaffected and unchanged. In light
of current market conditions, the Bank’s Executive has postponed the beginning
of gilt sale operations that were due to commence next week. The first gilt
sale operations will take place on 31 October and proceed thereafter. The Bank
will shortly publish a market notice outlining operational details.
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