LONDON / RankWire.AI / – The Bank of England has laid out a multi-year plan to complete the unwind of its monetary-policy gilt portfolio by September 2034. The central bank will conduct £20 billion of active gilt sales each year. Bonds reaching maturity will also leave the portfolio. Together, sales and maturities will reduce the holdings by about £46 billion annually on average. The framework replaces the previous practice of setting a new quantitative tightening pace each year.
The Bank of England held £488 billion of gilts in its monetary-policy portfolio when it announced the new structure in September 2026. It will allow £222 billion of bonds that mature before 2035 to run off naturally. The central bank has also identified £146 billion of gilts maturing from 2035 through 2049 for active sales. A separate £120 billion pool of longer-dated gilts will support current and future banknote issuance.
Officials are also reviewing how the £146 billion sales portfolio could move through the market. One option would have the government purchase those gilts from the Asset Purchase Facility at market prices. HM Treasury would instruct the Debt Management Office to conduct the purchases through government financing operations. The arrangement has not received final approval. The Bank plans to review progress before April 2027 and publish operational details after completing that work.
Multi-year framework replaces annual reset
The Monetary Policy Committee unanimously approved the new quantitative tightening framework. It set active gilt sales at £20 billion a year under the longer schedule. The Bank intends to keep that annual sales rate under either execution method, subject to the committee’s specified conditions. Existing Asset Purchase Facility sales auctions remain paused during the review. The change gives the gilt unwind a defined timetable through 2034 while preserving the Bank’s stated operating principles for quantitative tightening.
HM Treasury continues to indemnify the Asset Purchase Facility against gains and losses arising from its operations. During the quantitative easing period, the facility generated substantial positive cash flows for the government. Cumulative transfers to the Treasury reached £123.9 billion at their September 2022 peak. Cash flows later reversed as higher interest rates raised the facility’s financing costs. The Bank has said the timing of gilt sales can affect when losses appear in the public finances.
Gilt portfolio has fallen sharply since 2022
The scale of the Bank’s bond holdings has already declined significantly from its earlier peak. Monetary-policy gilt holdings stood near £895 billion in February 2022. By September 2026, they had fallen to £488 billion. The portfolio declined by £70 billion over the latest 12-month period. Active sales accounted for £21 billion of that reduction, while bond maturities provided the rest. Bank staff estimated that quantitative tightening added about 20 to 30 basis points to UK long-term bond term premiums.
The Monetary Policy Committee separately kept Bank Rate at 3.75% at its September meeting, with a 6-3 vote. The committee reached the quantitative tightening decision unanimously. The Bank of England continues to identify Bank Rate as its main monetary-policy instrument. Under the new schedule, its monetary-policy gilt holdings will reach zero by September 2034. The separate £120 billion portfolio linked to banknote issuance will remain outside the quantitative tightening path and continue serving that distinct purpose.