Central Banks
BOE’s Nightmare Scenario Came to Life as UK Markets Crashed
- New market stability action sows monetary policy confusion
- Fears about deficit financing accusations raised years ago
City workers walk near the Bank of England (BOE) in the City of London.
Photographer: Carlos Jasso/BloombergThis article is for subscribers only.
Last week, the Bank of England was confronted with a nightmare scenario it had long feared. A corner of UK financial markets faced a liquidity crunch at a time of soaring inflation and all the BOE could do in response was buy government debt.
The £65 billion ($72 billion) pledge staunched the crisis but it threw the central bank into a contradictory policy position, one it may be confronted with again over time.