3 ms·

I don't understand. If the government is forced to accept higher interest rates for those bonds, wouldn't that drive up the value of GBP?

• origin_path 4y ago
  The government isn't forced to accept higher rates. They control the central bank and can force the BoE to buy government debt at whatever interest rate they like. At one point in the past I think Osborne actually forced the BoE to quietly return to the Treasury all the interest payments the government had been making to them! However, shifting bonds from external lenders to the BoE is money printing and will create inflation + lower the value of the currency. So lower currency value is effectively a bet that the government will stop bond rates rising too much by making up the difference via printing.