Oil surges to $108, threatening fresh inflation shock - will Bank of England now hike rates this year?

The Bank of England is expected to reduce the pace of its bond sale programme after recognising its efforts have driven up borrowing costs during a period of record-high government bond yields, according to economists. The Monetary Policy Committee will vote to lower the annual quantitative tightening (QT) programme from £70bn to £50bn at its meeting on Thursday.

Some analysts predict the Bank could halt sales of long-dated bonds altogether. The move follows calls for the Bank to pause active sales of its large bond portfolio, which has made it distinct from other international central banks. Critics argue that this approach has inadvertently increased borrowing costs and put undue pressure on the UK's public finances.

Deutsche Bank economists Maui Brennan and Sanjay Raja noted that a £50bn annual QT envelope remains their base case, while RSM UK's Thomas Pugh believes the MPC might reduce or pause the sales of longer-dated gilts. The decision, which sets the Bank's QT direction for the next year, aims to provide market certainty, as opposed to the eight annual meetings for the Bank's main interest rate.