The Bank of England left its key interest rate unchanged on Thursday but offered Chancellor Rachel Reeves a modicum of relief by slowing the pace of its bond sales.

The Monetary Policy Committee voted to slow the pace of what it calls quantitative tightening, saying it will only reduce its stock of government bonds by £70 billion over the next 12 months, after running it down by £100 billion in both of the last two years.

The move will moderate the upward pressure on the price that the government pays to borrow in the bond market. Although economists are split over how big the actual effect will be, it’s a rare piece of good news for the chancellor as she draws up her budget for next year.   

The MPC voted 7-2 to keep the Bank Rate at 4 percent until its next meeting in November, with only Swati Dhingra and Alan Taylor dissenting from the majority opinion. Governor Andrew Bailey and Deputy Governor for Markets Dave Ramsden, who had both voted for a cut at the MPC’s last meeting in August, changed their votes to “hold.”

While Bailey insists that interest rates are still trending down, the Bank repeated that it has to be “gradual and cautious” in easing policy, given that inflation is still running at 3.8 percent. The Bank expects it to fall over the next couple of years, reflecting what it called “downside domestic and geopolitical risks around economic activity.”

“Another rate cut after August’s historic double-vote was always a non-starter, especially as inflation continues to track well-above the Bank of England’s target of 2 percent,” Brad Holland, director of investment strategy at wealth manager Nutmeg, said in emailed comments. He noted that financial markets don’t fully expect another cut in interest rates until April.

Gilts under pressure

The Bank had been expected to slow the pace of “QT” to ease the pressure on the government’s long-term borrowing costs in particular. Yields on bonds with maturities over 10 years have risen around the world this year on growing concerns about the ability of governments to repay their debts.

Reforms to some big pension systems, including the U.K., have also meant that pension funds no longer have as much of an incentive to buy 30-year debt to match their liabilities.

The U.K. has been no exception to this trend: the yield on 30-year gilts hit 5.75 percent last month — its highest in 27 years — although it has since fallen back to a more manageable 5.43 percent. The gilt market has also been conspicuously more volatile this year than its peers in the U.S. and Europe at times when U.S. trade policy has caused jitters around the world.

The BoE said on Thursday that while trading in gilts had remained “orderly,” such factors “could pose a risk that QT would have a greater impact on market functioning than previously.”

The “envelope” of £70 billion consists of £49 billion in bonds that will mature naturally and £21 billion of active sales. In contrast to previous years, when the BoE has distributed its sales evenly across all maturity segments, it will sell fewer long bonds out of its portfolio this year, splitting sales 40:40:20 across the short, medium and long maturity segments.

As with the decision on rates, there were differing opinions on the MPC about the pace of QT. Chief Economist Huw Pill, who has become the foremost “hawk” on the committee, voted to keep the pace of run-off at £100 billion, while Catherine Mann voted for a reduction to £62 billion, albeit with an equal distribution across maturity segments.