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Marcus Ashworth

Bank of England Should Pull Its Own U-Turn on Gilt Sales

Follow the Chancellor. The gilt market is in no fit state to cope with the UK central bank offloading its bond holdings in the coming months.

Sometimes a U-turn is the only solution.

Sometimes a U-turn is the only solution.

Photographer: Scott Barbour/Getty Images

"The better part of valor is discretion,” Shakespeare wrote in Henry IV, Part One. Chancellor of the Exchequer Kwasi Kwarteng bowed to the inevitable on Monday and U-turned on his plans to lower the highest rate of income tax. The Bank of England should mirror his caution by shelving plans to sell its bond holdings for at least the rest of this year.

Kwarteng has the Bank of England to thank for calming markets sufficiently to give him the space to make adjustments to the tax giveaways announced Sept. 23. After today’s reversal on the most controversial element of the package, sterling briefly strengthened versus the dollar but swiftly reversed its gains. UK government bond yields took only fleeting notice and are higher on the day. Political expediency is not going to solve pressing underlying economic problems.