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

Following the extremely volatile European markets during the past few days and the euro and pound dropping rapidly against the US dollar, the Bank of England has decided to intervene in bond markets. UK government bond yields have been erratic and the pound sterling also dropped to a lifetime low against the greenback. On Wednesday, the Bank of England noted that it was monitoring the “significant repricing” of UK assets very closely.

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

The Bank of England (BOE) disclosed on Wednesday that it will start temporarily buying long-dated bonds and suspend the quantitative tightening tactics the central bank recently deployed. Two days ago, the UK’s native fiat currency, the pound sterling, slid to an all-time low against the US dollar, and during the early morning (ET) trading sessions on Wednesday, the pound plummeted to 1.0541 nominal US dollars per unit.

Yields on UK government bonds have skyrocketed in recent times and are suffering from the same volatility as US Treasury bonds. The yields in the UK experienced the largest rise since 1957 and in a statement Wednesday, BOE said it was monitoring the situation very closely. “Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability,” the BOE said on Wednesday. The UK central bank 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 UK households and businesses.”

The BOE’s actions follow a similar move by the Bank of Japan six days ago. After the Japanese yen slipped to a 24-year low, the Japanese central bank decided to intervene in foreign exchange markets. 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 UK government bonds.

At the time of writing, the pound is trading for 1.0661 nominal US dollars per unit, down 0.61% during the last 24 hours. The BOE detailed that it plans to intervene “on whatever scale necessary” to “restore orderly market conditions.”

What do you think about the Bank of England intervening in UK bond markets? What do you think about the pound’s performance against the US dollar? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols today emerging.