Pound plummets again as Bank of England boss insists he will not extend emergency support
11 October 2022, 23:58 | Updated: 12 October 2022, 01:39
The pound has plummeted again after Bank of England boss Andrew Bailey insisted he will not extend emergency support for pension funds.
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Mr Bailey said on Tuesday that help would stop at the end of the week, urging pension fund managers to make sure that riskier investments were offset by less risky ones.
"We have announced that we will be out by the end of this week. We think the rebalancing must be done," Mr Bailey said.
"And my message to the funds involved and all the firms involved managing those funds: You've got three days left now. You've got to get this done."
Following his statement, the pound dropped sharply against the dollar to below $1.10.
Read more: Bank of England steps in again to bolster bond-buying plan after mini-Budget chaos
Bank of England intervention had nothing to do with mini-budget
Earlier on Tuesday, the Pensions and Lifetime Savings Association - an industry body - called for an extension to the bond-buying programme until October 31 "and possibly beyond."
But Mr Bailey stressed that the programme was part of financial stability operations, not a monetary policy tool, and had to be temporary as it risked clashing with its obligations to control inflation.
The Bank of England extended its bond-buying to include inflation-linked debt almost two weeks after launching it to help pension funds cope with a slump in bond prices caused by the mini-budget.
"Things seemed calmer again today," Mr Bailey said, referring to conditions in the gilt market.
"We will see."
Pension funds, which are big holders of UK government debt and index-linked bonds, suffered sharp falls in bond prices after the mini-budget, forcing many private pension funds to try to raise extra cash by selling bonds.
The turmoil has also hit the mortgage market, where interest rates have soared.
'Working incredibly hard and incredibly closely with the Bank of England'
Joshua Mahony, senior market analyst at online trading platform IG, said: "The Bank of England has once again interjected in the gilts market, with the extension and expansion of last week's 'temporary' intervention signalling the fact that the problems facing the pensions market is far from a simple fix.
"While the Bank is expected to end its support on Friday, comments from the Pensions and Lifetime Savings Association (PLSA) highlight a feeling that the Bank may need to push its policy through into November if it is to adequately prop up an industry that continues to struggle under the weight of a highly volatile gilts market.
"For the pound, the Bank's action highlights both the fragility of the financial system and the potential for additional inflation thanks to this fresh bout of quantitative easing."
