The Bank of England is likely to deliver a “significant” rate hike at its next meeting in November after finance minister Kwasi Kwarteng’s tax cut plan unleashed turmoil in financial markets, BoE Chief Economist Huw Pill said yesterday.
After the pound touched an all-time low of $1.0327 on Monday, leading economists, investors and executives had earlier warned that rock-bottom investor confidence in British assets would recover only if Kwarteng scrapped the economic plan he outlined on Friday.
British government bonds have also sold off at a ferocious pace since the fiscal plans sparked a crisis of confidence in new Prime Minister Liz Truss’s handling of the economy.
“It is hard not to draw the conclusion that this will require a significant monetary policy response,” Pill told the CEPR Barclays Monetary Policy Forum.
With analysts still speculating about Britain’s future financial direction, and markets volatile, a growing number of mortgage providers, unable to price loans, suspended sales.
US economist Larry Summers, a former US Treasury Secretary, said surging interest rates on long-dated British debt were a sign that credibility had been lost, adding that London’s viability as a global financial centre was at risk.
“My guess is that pound will find its way below parity with both the dollar and euro … The first step in regaining credibility is not saying incredible things,” he said, after Kwarteng suggested he wanted further tax cuts still.
Source:https://www.gdnonline.com/
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