The Bank of England (BOE) announced that it will launch a temporary government bond-buying program to prevent material risk to financial stability after unfunded government tax cuts affected the markets and sent the pound tumbling.
The emergency intervention means the central bank of the country will purchase government bonds in an effort to stabilize the market and drive down the rising cost of government borrowing. The Bank of England (BOE) is monitoring developments in the financial markets very closely in light of the significant re-pricing of the United Kingdom and global financial assets.
The Bank of England (BOE) will carry out temporary purchases of long-dated UK government bonds from September 28, 2022. The main purpose of these purchases will be to restore orderly market conditions.
The move came after the International Monetary Fund urged the conservative government of the United Kingdom to re-evaluate unfunded tax cuts that it might fuel inflation and are likely to increase economic inequality.
After IMF warning to a group of seven economies, the value of the pound has sagged, and the intervention of BOE did not boost it. The government of the United Kingdom said it was underwriting the emergency bond purchases of BOE, which are due to last for two weeks.