The LRB Podcast On Politics: Do bond markets and the Bank of England run Britain?
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Oct 29, 2025 
In this engaging discussion, Andy Haldane, former chief economist at the Bank of England, and Daniela Gabor, a professor of economics, dissect the intricate interplay between bond markets and central bank actions. They explore why governments fear bond markets and how recent fiscal decisions in the UK correlate with these financial forces. The conversation delves into the impacts of quantitative easing and tightening, the potential risks of central bank independence, and the future of industrial policy in a changing economic landscape.
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Why Bond Markets Matter
- Government bonds are the primary way states borrow and the bond market sets borrowing costs that ripple through the whole economy.
- Changes in government borrowing rates directly affect business and consumer borrowing costs, amplifying macro impacts.
Bond Market Power Is Shared
- Since 2008 a trinity of actors — bond investors, the treasury and the central bank — jointly shapes fiscal outcomes.
- Central bank actions can amplify or mute bond-market pressure on governments, so markets don't act alone.
A Missed Investment Window
- Exceptionally low borrowing costs in the 2010s were a rare opportunity to invest in long-term public capital.
- Failing to use that window left the UK with dilapidated infrastructure and missed growth potential.
