LONDON / RankWire.AI / – The Bank of England has adopted a multi-year plan to reduce its remaining monetary-policy gilt holdings through September 2034. The central bank will sell £20 billion of government bonds each year. Other securities will leave the portfolio as they mature. The combined effect will cut holdings by about £46 billion a year on average. The framework replaces annual decisions on the pace of quantitative tightening with a longer timetable for completing the process.
The Bank held £488 billion of gilts in its monetary-policy portfolio when it announced the framework in September 2026. It will allow £222 billion of bonds maturing before 2035 to run off naturally. Another £146 billion, covering gilts maturing from 2035 through 2049, forms the active sales portfolio. The Bank also plans to retain £120 billion of longer-dated gilts. Those securities will support present and future banknote issuance rather than form part of the monetary-policy unwind.
Officials are also examining a different method for handling the £146 billion sales portfolio. Under that model, the government would purchase gilts from the Asset Purchase Facility at market prices. HM Treasury would direct the Debt Management Office to conduct those purchases through government financing operations. The arrangement has not received final approval. The Bank of England will review progress before April 2027 and will issue operational details after that review.
Gilt sales shift to long-term framework
The Monetary Policy Committee unanimously approved the new quantitative tightening plan. It set active gilt sales at £20 billion a year under the multi-year schedule. The Bank intends to keep that sales rate regardless of the final execution method, subject to limited conditions set by the committee. Current Asset Purchase Facility sales auctions remain paused while officials assess the revised arrangements. The central bank expects to outline the operating structure by April 2027.
The Asset Purchase Facility operates under an indemnity from HM Treasury covering gains and losses from its transactions. The facility previously generated large cash transfers to the government during the quantitative easing period. Cumulative transfers reached £123.9 billion at their September 2022 peak. Cash flows later reversed as higher interest rates increased financing costs. The Bank has said the timing of gilt sales can affect when losses appear, while lifetime costs also depend on interest rates and market prices.
Quantitative tightening continues through 2034
The Bank has already cut its government bond holdings sharply from their peak. Monetary-policy gilt holdings stood near £895 billion in February 2022. They had fallen to £488 billion by September 2026. During the latest 12-month period, the portfolio shrank by £70 billion. Active gilt sales accounted for £21 billion of that reduction, with maturities making up the balance. Bank staff estimated that quantitative tightening added about 20 to 30 basis points to UK long-term bond term premiums after the process began.
The Monetary Policy Committee separately kept Bank Rate at 3.75% at its September meeting. Six members voted to hold the rate, while three preferred a different decision. The committee unanimously backed the quantitative tightening framework. The Bank continues to identify Bank Rate as its main monetary-policy tool. Under the new schedule, monetary-policy gilt holdings will reach zero by September 2034. The separate £120 billion portfolio linked to banknote issuance will remain outside that reduction path.