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Leadsom warns of a blind alley with no way out

Members of the Treasury select committee have warned that not enough is being done to prepare for the unwinding of quantitative easing.

The Bank of England has bought £325bn of Government bonds from the secondary market in the past three years.

Last week, during a Treasury select sub-committee hearing with the Debt Management Office, which sells gilts for the Government, committee member and Conservative MP Andrea Leadsom warned that the bank’s plan to raise rates and sell off a third of its portfolio at a time would affect the yield curve of Government bonds.

DMO chief executive Robert Stheeman said he has not spoken “in any great detail” with the monetary policy committee about how QE will be unwound as it is a decision for the committee. He added he has raised the issue with the Treasury in the past but has not done so recently because the need to unwind QE is a long way off.

Leadsom called on the DMO to raise how QE will be unwound with the MPC. She said: “You should think about the exit before you walk down a blind alley. All we are doing is more QE and still it appears no one has actually considered the mechanism by which to get out.”

Stheeman said it is for the bank to approach the DMO and that his office is ready to talk when that happens.

TSC chairman Andrew Tyrie said: “We need to start thinking about this because it is a huge sum of money.”

Baronworth Investments and Financials director Colin Jackson says: “One would have thought the bank would have a plan already.”


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