Bank of England: Impact of quantitative tightening on UK borrowing costs exceeds expectations

On July 30, the Bank of England said its plan to shrink its balance sheet, known as "quantitative tightening", would have a slightly higher impact on UK borrowing costs than previously estimated. The Bank of England pointed out in its monetary policy report released on Thursday that due to the impact of quantitative tightening (QT), the yield on British 10-year government bonds rose by 0.2 to 0.3 percentage points. This range is higher than previous estimates of 0.15 to 0.25 percentage points. The Bank of England will determine in September the pace of balance sheet contraction over the next year, including the size of its proactive bond sales. While some have criticized the plan for pushing up Britain's borrowing costs, the main factors contributing to this level are in fact other conditions such as high inflation. Pooja Kumra, strategist at TD Securities, said: "This shows that the Bank of England is more aware of the impact of quantitative tightening on interest rates," and also confirms market expectations that the pace of quantitative tightening will slow down further.