Britain’s finance minister has announced that he is bringing forward the presentation of much-awaited budget forecasts, while the Bank of England unveils new measures to ensure market liquidity and calm the financial turbulence triggered by a colossal and uncosted budget of the government.
Chancellor of the Exchequer Kwasi Kwarteng will therefore publish on October 31 instead of the initially scheduled November 23 budget forecasts and his medium-term measures to ensure that British public finances remain on a sustainable path. Economists now expect Mr Kwarteng to reveal on October 31 significant cuts in public spending to try to reassure the markets about the credibility of its budget announced September 23. This included extensive help with energy billsto deal with the cost of living crisis, but also significant tax cuts targeting the wealthiest households in particular.
The whole was not quantified but economists valued this package of measures at a colossal amount of 100 to 200 billion pounds. Without planned savings measures, it had to be financed entirely by borrowing on the markets at a time when interest rates were rising sharply, with very high inflation of almost 10% in the United Kingdom, the highest in the G7.
Investors began to doubt the state’s ability to repay its debt and shed British assets, sending the pound sterling to an all-time lowand soaring long-term London borrowing rates.
Scared for Halloween?
In front of a risk of a downward spiral on long-term bond securities which weakened pension funds and risked spreading to credit conditions for households and businesses alike, the Bank of England had to intervene from September 28. She has launched a program that can go up to £65bn of long-term treasury bill redemptions to prevent a collapse of liquidity in this market and to reduce the volatility of prices and rates.
“I warmly welcome Kwasi Kwarteng’s decision to advance the budget estimates“, welcomes Mel Stride, the chairman of the Parliamentary Treasury Committee, on Monday. “If they are well received by the markets so the meeting of the monetary policy committee “of the Bank of England on November 3”could result in a lower rate hike” than expected, which is “crucial for millions of home loan holders”, he adds, on Twitter.
Monday, at the same time, the Bank of England announced new measures to ensure liquidity in the long-term government bond market before the end of its buyback program for these assets on Friday.
Kwasi Kwarteng’s budget presentation on September 23 was unanimously condemnedthe IMF launching a rare and scathing appeal to rectify the situation, and the rating agencies lowering their perspective on the British debt.
Kwarteng is traveling to Washington this week, like Bank of England Governor Andrew Bailey, for the fall meetings of the International Monetary Fund (IMF) and will attempt to reassure the international financial community of the credibility of its plan. “Central bank intervention helped calm government debt markets but there are still concerns about “a possible return of market dysfunctions next week, after its support program ends, comments Interactive Investor analyst Victoria Scholar.
The yield on 30-year government bonds, which had risen from 3% in early September to more than 5.14%, a peak since 1998before the intervention of the BoE, was still evolving on Monday around 1:00 p.m. GMT at 4.59%, up since the government and BoE announcements on Monday.
The pound, for its part, yielded 0.32% to 1.1059 dollars. “With the pound remaining weak and government borrowing costs rising to worrying levels, the UK government and the Bank of England have launched a dual bid to calm markets,” said Hargreaves analyst Susannah Streeter. Lansdown.
If the new actions of the monetary institution want in particular “to prevent new problems for pension funds” for the moment they “have not succeeded much in moving the cursor” and “the market could again take fear for Halloween” – October 31, the day of Mr. Kwarteng’s budget presentation, said Ms. Streeter.
Chancellor of the Exchequer Kwasi Kwarteng will therefore publish on October 31 instead of the initially scheduled November 23 budget forecasts and his medium-term measures to ensure that British public finances remain on a sustainable path. Economists now expect Mr. Kwarteng to reveal major public spending cuts on October 31 in an attempt to reassure the markets of the credibility of his budget announced on September 23. This included vast aid for energy bills, to deal with the cost of living crisis, but also significant tax cuts targeting the wealthiest households in particular. The whole was not quantified but the economists estimated this package of measures at a colossal amount of 100 to 200 billion pounds. Without planned savings measures, it had to be financed entirely by borrowing on the markets at a time when interest rates were rising sharply, with very high inflation of almost 10% in the United Kingdom, the highest in the G7. Investors began to doubt the state’s ability to repay its debt and shed British assets, sending the pound plunging to an all-time low, and long-term London borrowing rates soaring. .Fear for Halloween?Faced with a risk of a downward spiral on long-term bond securities which weakened pension funds and risked spreading to credit conditions for households and businesses, the Bank of England had to intervene to from September 28. It has launched a program of up to £65bn of buybacks of long-term Treasury bills to prevent a liquidity crunch in this market and ease price and rate volatility. “I warmly welcome the decision of Kwasi Kwarteng to bring forward the budget estimates,” said Mel Stride, chairman of the Parliamentary Treasury Committee, on Monday. “If they are well received by the markets then the meeting of the monetary policy committee” of the Bank of England on November 3 “could result in a lower rate hike” than expected, which is “crucial for millions holders of mortgages”, he adds, on Twitter. On Monday, the Bank of England also announced new measures to ensure liquidity in the market for long-term government bonds before the end of its term. buyback program for these assets on Friday. Kwasi Kwarteng’s budget presentation on September 23 was unanimously condemned, with the IMF issuing a rare and scathing appeal to rectify the situation, and the rating agencies lowering their outlook on British debt. Kwarteng is traveling to Washington this week, like Bank of England Governor Andrew Bailey, for the fall meetings of the International Monetary Fund (IMF) and will try to reassure the international financial community of the credibility of his plan. “Central bank intervention has helped calm government debt markets but there are still concerns about ‘a possible return to market dysfunction next week after its support program ends,’ Victoria Scholar comments. , an analyst at Interactive Investor. 1:00 p.m. GMT at 4.59%, up since the announcements of the government and the BoE on Monday. The pound, for its part, yielded 0.32% to 1.1059 dollars. “With the pound remaining weak and government borrowing costs rising to worrying levels, the UK government and the Bank of England have launched a dual bid to calm markets,” said Hargreaves analyst Susannah Streeter. Lansdown. If the new shares of the monetary institution want in particular to “prevent further problems for pension funds” for the moment they “have not succeeded much in moving the cursor” and “the market could again take fear for Halloween” – October 31, the day of Mr. Kwarteng’s budget presentation, said Ms. Streeter.
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