After issuing another warning about a ‘substantial risk’ to financial stability, the Bank of England (BoE) announced that it will increase its purchases of government bonds in an effort to stabilise market conditions. Notably, after the emergency programme began following September’s mini-budget, markets went into a frenzy, raising borrowing costs.
The BoE and the UK government have already taken steps this week to calm the bond markets, in particular when state borrowing skyrocketed.
The government of Prime Minister Liz Truss unveiled debt-fueled tax cuts in a mini-budget last month. The pound hit a record low as a result of the budget.
In a statement, the BoE said the latest action would ‘act as a further backstop to restore orderly market conditions’.
After the Bank announced that the scheme will terminate as scheduled on Friday, government borrowing costs spiked once more. The Bank of England intervened to take emergency action as a result of the volatile market fluctuations that also put certain pension funds in danger of failing.
Following a ‘substantial repricing’ of government bonds at the beginning of the week, the Bank issued a warning of a new market slump. It will continue to purchase bonds as part of the September 28 emergency measures and will also purchase a larger variety of bonds.
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