Bank Of England In Fresh Emergency Move To Calm Markets
October 11, 2022
The Bank of England has warned of a "material risk" to financial stability as it made a fresh emergency move to try and calm investors.
The Bank said it would buy more government bonds to try and stabilise market conditions.
The emergency scheme started after September's mini-budget, which spooked markets and drove up borrowing costs.
Government borrowing costs rose again sharply after the Bank said the scheme would end as planned on Friday.
A decision by the chancellor to bring forward his plan to balance the government's finances by three weeks also failed to reassure investors.
In the wake of the September mini-budget, the pound slumped to a record low, government borrowing costs surged and the Bank of England was forced to step in and take emergency action after the dramatic market movements put some pension funds at risk of collapse.
The market volatility eased but on Monday government borrowing costs were almost at the levels seen at the height of the market turmoil.
The Bank said government bonds had seen a "significant repricing" since the start of the week and warned there was a risk of a fresh downturn in markets.
It said it would now buy a wider range of bonds as well as continue to buy bonds as part of the original emergency measures it launched on 28 September.
The move came as the Institute for Fiscal Studies think tank warned that Mr Kwarteng must make "big and painful cuts" of up to £60bn to balance the books when he announces his economic plan on 31 October.
