The Bank of England tries to calm panicked markets

CNN business

UK policymakers are trying to calm markets as Prime Minister Liz Truss ramps up borrowing on tax cut plans. panic among investors worried it could fuel inflation and destabilize government finances.

The Bank of England said on Monday it was “monitoring developments in the financial markets very closely” in light of the sharp rise in financial asset prices.

He said that he will examine the government’s inflation plans at the next meeting in November, and “will not hesitate to change interest rates as necessary.”

The bank published its comments as the UK Treasury said Kwasi Kwarteng, the country’s finance minister, would outline plans to ensure UK debt sustainability on 23 November. hourly forecast

The UK pound has fallen and government bonds have tumbled since Truss and Kwarteng unveiled their economic program on Friday. He wants to boost economic growth, but has raised alarm among investors, who are worried about his unorthodox approach.

While the Truss government aims to boost demand to fight a recession this winter, the Bank of England is trying to cool the economy in order to put a lid on the fastest price rises among the G7 countries.

That tension, along with concerns about tens of billions of dollars in new loans, pushed the pound to a record high against the US dollar on Monday and has triggered a massive sell-off in UK government bonds that only the Bank of England can do. the more difficult challenge of controlling inflation.

“It remains to be seen whether today’s statement from the government and the Bank of England will be enough to ease the markets’ fears about the government’s fiscal policy,” said Paul Dales, chief UK economist at Capital Economics.

“The initial reaction in the markets, as the pound falls again, after recovering some ground, suggests that the problem is not yet put to bed.”