The Bank of England will spend almost £65bn buying government debt in an attempt to avert an economic crisis.
Economists have warned that the unusual move could fuel inflation, but the bank said yesterday the intervention was essential as Britain faced a “material risk” to its financial stability.
The bank intervened after warnings from pension funds that they could be hours from having to make major fire sales of assets at knock-down prices, putting pensions in jeopardy.
One prediction stated that without the intervention, gilt yields would have gone up to 7% or 8%, leaving 90% of pension funds without collateral. As Kerrin Rosenberg, Cardano Investment chief executive, said: “They would have been wiped out.”
Threadneedle Street said it would spend £5bn a day for the next 13 weekdays, but added that the purchases would be carried out “on whatever scale is necessary” to “restore orderly market conditions”, with taxpayers underwriting them through the Treasury.
