The Bank of England’s Monetary Policy Committee is set to meet this Thursday, with market attention focused on the annual review of its quantitative tightening program rather than interest rate adjustments. Investors anticipate that the central bank will maintain the Bank Rate at 3.75%, a decision widely expected by economists with a projected 6-3 vote.
The BoE is expected to reduce the pace of its gilt runoff from £70 billion to approximately £50 billion annually for the period between October 2026 and September 2027. This adjustment is largely attributed to a mechanical decline in the volume of maturing bonds, while active bond sales are projected to remain at roughly £20 billion per year.
The central bank’s total gilt holdings have decreased to approximately £488-490 billion since the tightening program commenced in early 2022. Market analysts note that direct sales of long-dated gilts exert upward pressure on yields, with some estimates suggesting that such activity could increase 30-year yields by around 70 basis points.
With UK inflation reaching 3.1% in August, exceeding the 2% target, some participants are considering the possibility of rate hikes as early as November 2026. Investors are advised to prioritize the quantitative tightening announcement, as it establishes a trajectory for the coming year and provides a clearer signal regarding the bank's balance sheet normalization strategy.
