BTW--the BoE have no control over the bond market--THEY determine our IR from here on in. And of course Merv and the rest know that and will not have to be the ones to do the necessary.
But... do they?
Are we talking about the same interest rates?
I've read about the 'stratospheric' interest rates in the early 1990s - and didn't really understand what was supposed to have happened then... or - maybe - I understand - but don't really believe.
I do not see why bond prices necessarily dictate central bank base rates. I don't even see why short-term rates (LIBOR, for example) should correlate strongly with bond yields. Sure, I understand yield curves - and how an excessively steep slope yields a tendency for arbitrage... but - if central banks chose - they could keep their rates far lower than that we'd traditionally have inferred from bond prices... and control things by the amount of credit they issue not the rates they charge.
I don't see why the central bank base rate had to climb so high in the crisis of '92. I understand that the government borrowed £16bn unexpectedly and was charged an arm and a leg for doing so... but I don't see why that one-off shock required central bank interest rates to follow suit... and definitely not as quickly as they did.
Similarly, today, I see no reason in principle why bond prices couldn't become detached from central bank base rates... and the difference be considered the risk premium.
Perhaps you mean that retail borrowing rates are determined by the bond markets - and I'd agree - but that's always been the case.