What happens when quantitative easing stops?

Where the Gilt market goes in coming months is going to be very important for the UK economy and politics. There is little history of countries being able to sustain deficits of the UK’s magnitude, for very long, without serious market problems. At the moment, we’re getting by thanks the sticking plaster approach of quantitative easing. The Bank of England has purchased £186bn of gilts so far this year, almost perfectly matching the £179bn the Debt Management Office has needed to sell so far. As long as the Bank is willing to support the market with a fast-rolling printing press, government funding at attractive rates is assured. However, the end of the money printing programme will require the Gilt market to adjust to the rates which market buyers want in return for providing financing to the UK.