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4h ago

Pound Falls as BoE Holds Rates and Slows QT, Borrowing Overshoot Drives Gilt Yields Higher

A larger-than-forecast borrowing outturn sharpened budget pressures, rattling sterling.

Woman holds British Pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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Overview

  • The Bank of England kept Bank Rate around 4% and reduced the pace of gilt sales to ease strains in longer-dated bonds.
  • Official figures showed £83.8 billion in public borrowing for April–August, £11.4 billion above the OBR’s forecast.
  • Sterling headed for its biggest two-day drop since late July, sliding to around $1.351 in early Friday trade.
  • Long-dated UK yields climbed, with 30-year gilts up about 4.3 basis points to roughly 5.547%.
  • Persistent 3.8% August inflation limits room for rate cuts as Rachel Reeves faces tougher choices for the November budget, with global Fed-cut bets and a yen rally adding cross-market pressure.