Fiscal policy and capital markets

The last purchase of gilts under the current quantitative easing scheme should happen before the end of this month, and it is possible that the Bank of England will not extend the scheme at its February meeting. Whenever this happens, capital markets will have an even greater influence over the supply of credit to meet the government's borrowing requirements. This will mean further scrutiny of the state of the public finances and of plans to cut the current budget deficit. This meeting will explore the outlook for the gilt market and prospects for fiscal consolidation. It will provide an opportunity to discuss key issues, such as why a rating agency would downgrade a sovereign credit rating and the circumstances under which market participants would demand higher risk premium for loans to government. The meeting will be held under the Chatham House rule and will be of interest to senior civil servants, financial sector managers, politicians and government advisors.

Date: 29th January 2010

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