LONDON (Reuters) – The Bank of England (BoE) announced new measures on Monday aimed at reassuring markets ahead of the scheduled expiry on Friday of the emergency program launched in the face of turbulence caused by the Truss government’s “mini budget”.
As massive but unfunded tax cuts announced by Finance Minister Kwasi Kwarteng reignited tensions in the bond market and sent the pound plummeting, the central bank announced on September 28 that it would buy up to five billion pounds (5.67 billion euros) per day of government bonds with a maturity of at least 20 years.
But it has so far only bought about five billion pounds worth of securities in total.
The new measures announced on Monday, however, allow it to significantly increase its purchases until the end of the program.
“The Bank is ready to deploy this spare capacity to increase the maximum size of the five remaining operations beyond the current level of up to five billion pounds for each operation,” it explains in a press release.
The daily cap will be announced at 09:00 (08:00 GMT) each morning and Monday’s has been set at 10 billion pounds.
At the same time, the BoE will open a temporary reverse repo facility to help banks reduce the risk of liquidity strains that could affect some pension funds, as was the case last month.
(Reportage William Schomberg, French version Marc Angrand, edited by Kate Entringer)
Copyright © 2022 Thomson Reuters