Bank of England Deputy Governor Dave Ramsden said the central bank’s new multi-year quantitative tightening strategy provides a coherent framework for unwinding its remaining government bond holdings, with the Bank planning to complete the process by the end of 2034. In a speech on Sept. 28, Ramsden provided further detail on how the Monetary Policy Committee’s September decision will be implemented and how the Bank plans to handle future gilt sales.
The MPC agreed earlier in September to fully unwind the stock of gilts held in its Asset Purchase Facility for monetary policy purposes. From the approximately £488 billion of gilts in the facility at the time of the decision, £368 billion will be subject to the multi-year unwind, while £120 billion of long-dated gilts will remain in the APF to support the Bank’s current and future banknote issuance.
The £368 billion designated for monetary policy unwind will be reduced at an annual average pace of £46 billion through the end of 2034. That total comprises £20 billion of annual gilt sales alongside gilts that mature naturally. The final maturity relevant to the monetary-policy portfolio is a £28.2 billion gilt due in September 2034, which the Bank expects to mark the completion of the QT process.
Ramsden said the shift from annual QT decisions to a fixed multi-year path should make the future pace of balance-sheet reduction more predictable. The MPC has retained two circumstances in which the pace could be reconsidered: if Bank Rate alone were judged insufficient to achieve the inflation target, or if financial markets were considered to be experiencing severe distress.
The Bank’s approach to gilt sales is also set to change. Ramsden said the Bank Executive is considering implementing the £146 billion of planned sales through transactions with the UK government rather than continuing to sell the securities directly into the market. The proposed model would involve HM Treasury instructing the Debt Management Office to purchase the gilts from the APF, after which the DMO would on-sell them to the National Loans Fund for cancellation and refinancing.
The proposed arrangement is still subject to final agreement with HM Treasury, and the operational details have not been finalized. Ramsden said the Bank intends to announce its implementation approach by April 2027. Regardless of the eventual sales method, the Bank intends to maintain the MPC’s £20 billion annual sales pace and complete the monetary-policy unwind by the end of 2034.
The proposed change follows several years of direct gilt sales by the Bank. Ramsden said the Bank had sold £129 billion of gilts through 120 auctions between the start of its sales program and September 2026, alongside approximately £259 billion of gilts that had rolled off through maturities. The Bank said its auctions had received an average cover ratio of 2.3 times, meaning bids were equivalent to 2.3 times the amount accepted.
Ramsden also discussed the effect of QT on UK government bond yields. Bank staff estimated in July that cumulative QT had increased 10-year gilt yields by roughly 20 to 30 basis points, although Ramsden stressed that estimates of QT’s specific effect remain uncertain because other factors also influence term premia and bond markets.
The September announcement itself was followed by a decline in gilt yields across the curve, according to Ramsden. Thirty-year gilt yields fell by about 10 basis points and the move persisted over subsequent days, while 10-year yields also declined by a similar amount. Ramsden said the market reaction suggested investors may have been anticipating a larger or faster QT program, although he also noted that positioning adjustments and lower uncertainty about the future QT path could have contributed to the move.
The Bank began quantitative tightening in 2022 after years of asset purchases under its quantitative-easing program. Ramsden said the APF had fallen by more than £400 billion from its £895 billion peak to around £488 billion by September 2026. The Bank’s stated objectives for QT include reducing the risk of a permanently enlarged balance sheet, lowering interest-rate risk and restoring headroom for potential future asset purchases.
The multi-year QT strategy also forms part of a broader shift in the Bank’s balance-sheet framework. The Bank has separately announced that £120 billion of long-dated APF gilts will remain to support banknote backing, while the monetary-policy portfolio is progressively unwound. The approach is intended to separate the assets retained for banknote backing from those being reduced as part of monetary policy normalization.
The Bank’s QT framework comes against a backdrop in which government bond yields remain important to broader financial conditions. Developments in other sovereign bond markets have also highlighted the relationship between central-bank policy, government borrowing and bond yields, including debates over central bank independence and bond yields in Japan.
Ramsden said the Bank’s three core QT principles remain unchanged: Bank Rate remains the active tool for adjusting monetary policy, gilt sales should avoid disrupting financial-market functioning, and sales should be conducted gradually and predictably. The new multi-year strategy changes the implementation horizon while keeping those principles at the center of the Bank’s approach.
