Bank of England buys UK bonds over markets turmoil

The Bank of England stepped in Wednesday to buy UK government bonds to shore up market confidence after Britain’s heavily-criticised budget aimed at fighting inflation.

“The purpose of these purchases will be to restore orderly market conditions,” a BoE statement said regarding its temporary buying of long-dated bonds.

The announcement came as government borrowing costs soar after Friday’s costly budget that sparked fears over the public finances.

The bank added that there was a “material risk to UK financial stability” should current market conditions continue.

“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy,” it said.

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As well as soaring UK government bond yields, the British pound on Monday hit a record low at $1.0350, perilously close to parity.

The bank “stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses,” it added Wednesday.

Analysts have warned that the BoE would need to hike interest rates even more aggressively in the coming months to try and bring down decades-high inflation.

The bank last week had ramped up its key interest rate by a half-point to 2.25 percent.