Why did the Bank of England intervene?
Why did the Bank of England intervene?https://ichef.bbci.co.uk/live-experience/cps/624/cpsprodpb/vivo/live/images/2022/9/29/54cf79d7-23dc-47cf-a345-d0bfe9011ffa.jpg
The tax cuts in Friday's mini-budget - and the borrowing that will fund them - shook the confidence of the markets in the British economy.
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That led to a significant fall in the value of UK government bonds, a type of investment where you loan money to the government in return for a rate of interest.
Pension funds hold a lot of government bonds because they are normally a very stable investment, but the fall in their value led to concerns the funds would have to begin selling assets - such as bonds and stock markets shares - to pay their creditors.
If that happened, it could have sparked a vicious cycle in which the sale of bonds pushes the price further down and triggers more sell-offs.
The Bank of England's intervention was a pledge to buy ￡65bn worth of bonds over the next 13 days, propping up the price of bonds and preventing that cycle getting under way.
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