Yves here. Wolf does the very important service of showing that (so far) the Bank of England intervention in the gilts market is much smaller than the press reports would lead you to believe. However, there’s also a lot of consternation as to why the Bank is engaging in easing in the midst of a tightening cycle.
In fairness, it’s not as if the Bank had any control over the recklessly stimulative and wealthy-enriching Truss/Kwarteng mini-budget that set gilts into a mini-meltdown. The Bank is also contending with aggressive interest rate increases by the Fed, which puts other central banks in the position of importing inflation (via further currency depreciaition) if they don’t keep pace. The Bank also may not have been sufficiently cognizant that British pension funds took greedy leveraged positions and were wrongfooted. If the UK is much like the US, large pension funds are close to unregulated so it’s not as if they can be prevented from running lemming-like into dodgy fads.
And the Bank relying (again so far) more on posturing and not as much as expected on actual buying does show some finesse. We’ve seen this sort of thing sometimes in central bank responses to crises, with a noteworthy version when Mario Draghi calmed rattled investor nerves by announcing the OMT…which amounted to nothing new, but was merely a rebranding of existing authorities.
I hope to give this a longer-form treatment, but the short version is
