11 October 2022 | Other

The Bank of England keeps on stabilizing the situation on the British market

The Bank of England announced Monday that it will provide additional support to British markets, stepping up its efforts to ensure financial stability after the government's plan to cut taxes and increase borrowing caused panic.

The central bank said it is ready to buy up to £10 billion ($11 billion) worth of government bonds every day this week, double the daily limit set when it announced the emergency intervention on Sept. 28.

The bank confirmed that the bond-buying program will end Friday, but said it will provide additional support "after the end of this week" to banks that are still reeling from the collapse of some pension funds. The central bank said it would accept a wider range of assets as collateral in exchange for cash.

The move sends another signal to investors that the central bank is willing to do what it can to restore more normal trading conditions to the bond market, which is necessary to lower the cost of borrowing for British households and businesses.

Long-term government bond yields, whose prices are moving in opposite directions, fell sharply after the Bank of England announced its initial action in late September.

The central bank said it was forced to act to prevent a "self-reinforcing spiral" after the market experienced historic sell-offs over budget plans unveiled by Finance Minister Kwasi Kwarteng and Prime Minister Liz Truss.

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