Bank of England Broadens Efforts to Secure Stability in Financial Markets

As the government looks to decrease taxes, the Bank of England has taken further steps to address the turmoil in financial markets caused by this move. The central bank expressed concerns that fluctuations in the bond market pose a "material risk" to Britain's fiscal stability.

The U.K. Bank of England recently announced measures to purchase both inflation-linked securities and conventional government bonds, totaling £10 billion ($11 billion) per day. The goal is to "restore orderly conditions" in the market, and the program will conclude on Friday as originally scheduled. The funds will be evenly allocated between the two types of bonds, according to the bank's statement.

Despite calls from pension funds to extend the program by two weeks, the central bank governor, in a speech at the annual meeting of the Institute of International Finance in Washington, stood firm on the original timeline. He emphasized that portfolio managers have a three-day window to rebalance their positions.

In response to a spike in yields on government bonds earlier this week, the bank expanded the program, reacting to concerns about increased government borrowing after the announcement of broad tax cuts without a clear funding plan. This development led to a market reaction, causing the pound to hit a record low against the dollar and putting pension funds at risk of liquidation.