The Bank of England is continuing to shrink the size of its balance sheet by selling off assets bought as part of its support for the economy during the Pandemic.

It will sell off £200 million in corporate bonds per week starting next month. As part of its programme of quantitative easing, the Bank bought around £20 billion of bonds from non-financial entities following the Brexit referendum and the Pandemic.

These sales are dwarfed by the ongoing divestment of Government Bond holdings, which are currently being reduced by £40 billion a month. This is being achieved by not reinvesting the proceeds of maturing paper.

The draining of liquidity from the market will add to the tightening of monetary policy which is happening in conjunction with rate increases which have been happening since last December and have been gradually increased in size.

The most recent increase of fifty basis points is expected to be matched at the bank’s next meeting, which will take place on September 15th. The Central bank is still committed to using monetary policy to bring down inflation, despite the lack of evidence so far that the policy is working.