Jeremy Hunt: UK’s new finance minister races to calm markets with swift reset

CNN business

Britain’s new finance minister, just days after taking office, will unveil details of a revised tax and spending plan on Monday in an effort to control choppy markets.

Jeremy Hunt will give a statement on Monday outlining how the UK intends to put its public finances on a sustainable path, the UK Treasury said. They wouldn’t make an announcement until the end of the month.

That move helped avoid panic selling in markets early Monday. UK bond prices rose and the pound rose 0.8% to $1,126.

But investors remain on edge. They were unhappy on Friday after Prime Minister Liz Truss sacked Kwasi Kwarteng, her previous finance minister, and reinstated a big tax hike on corporations.

While Hunt’s policy announcement may provide a short-term “rally of relief,” significant volatility is likely to persist, said Francesco Pesole, a strategist at ING.

The Treasury said Hunt met the Governor of the Bank of England and the head of the Debt Management Office on Sunday night to outline his plans. The finance minister’s full medium-term budget will be delivered on 31 October, along with a review by the UK’s tax watchdog, the Office for Budget Responsibility.

There are serious questions over whether Truss can hold on to his job after financial markets rejected his controversial economic package to boost growth by cutting taxes and boosting lending.

His government has come under intense pressure from investors and other members of the Conservative Party since the effort was launched just three weeks ago. Although Truss has rolled back many measures, including a plan to cut income tax for the highest earners, he has failed to restore confidence.

Over the weekend, US President Joe Biden said he believed Truss’ economic bailout plan was “a mistake”.

“I don’t agree with the policy,” he said, adding that it was up to “Britain to make that judgment.”

Investors are also eyeing the bond market on Monday as the Bank of England on Friday ended its £65bn emergency bond-buying programme, which was intended to temporarily support pension funds hit hard by the market turmoil.

Although the central bank ultimately bought just under £20 trillion of government debt, the intervention – announced on September 28 – helps provide some reassurance as the bond market falters.

The Bank of England said on Monday that the operations had “enabled a significant increase in the resilience of the sector”.