Emergency Bank move will not solve the problem

This is an immense show of force from the Bank of England trying to calm borrowing markets. It does raise some questions.

It underlines that this is a crisis, and the Bank has responded in emergency mode. The clear cause of this crisis was the chancellor's mini budget, leading to a loss of market confidence, and spiralling borrowing rates on government debt.

That crash in the value of loans to the government could become a "material risk to financial stability", says the Bank.

So it will now, for a temporary period, buy up those loans in unlimited quantities. The effective interest rates being charged to the UK government in these markets was spiralling to 20-year highs. That has now fallen back.

But it was not a decision made by the Bank's Monetary Policy Committee, who were informed of the decision after it was made by the Bank's financial experts.

It comes at exactly the same time as that committee had been committed to do the exact reverse policy - selling government debts. The process was due to start next week and has been delayed.

It is a massive intervention, but it could confuse markets about the clarity of policy making and lines of accountability. Sterling has fallen sharply again, close to all-time lows. This will not solve the government's problems. It might buy them some time.

The Bank of England move was driven by the potential for chaos in a corner of the financial services industry that underpins pensions funds. This was the specific threat to financial stability that prompted the Bank of England to act.

The speed and the scale of the collapse in the value of government bonds, known as gilts, which pension funds are required to invest in because they are normally so stable, put pressure on these investments.

The risk was the investments would have to be revalued or marked at the current low prices. In turn, that could have forced the pensions schemes to sell other assets, such as stock market shares.

This explains why the Monetary Policy Committee, that normally authorises bond-buying, did not make this decision. Insiders are adamant that this decision does not signal anything about where interest rates might go, and is not a form of loosening monetary policy or "printing money", creating it out of thin air to help a troubled government with its funding.

But all of this is only required because of the violent turn against British government debts since the mini-budget. It is a dramatic emergency medicine. The risk still lingers. It does not solve the underlying problem.