Bank of England’s QT plans overshadow interest rate decision at Thursday’s meeting

The Bank of England’s Monetary Policy Committee meets Thursday, and the most consequential outcome probably won’t be the interest rate decision. Bond investors have already largely priced in a hold at 3.75%. What they’re really watching is the annual review of quantitative tightening, the BoE’s plan for shrinking its massive pile of government bonds. Why QT matters more than the rate The BoE is expected to announce a reduction in the pace of its gilt runoff, slowing from £70 billion annually to roughly £50 billion for the October 2026 to September 2027 period. That’s not because policymakers are getting dovish. It’s largely mechanical: the pipeline of maturing bonds is shrinking, which means fewer gilts roll off the balance sheet naturally. Active gilt sales, where the BoE actually sells bonds into the market rather than waiting for them to mature, are projected to stay around £20 billion per year. The central bank’s total gilt holdings have already fallen to approximately £488-490 billion from their peak, a meaningful reduction since the tightening program began in early 2022. The distinction between passive runoff and active sales matters enormously for bond markets. When the BoE...