Il UK is increasingly in difficulty and struggling to keep under control the financial storm started after the announcement of the tax cut package – then partly cancelled – by the Government led by the Premier Liz Truss which caused the collapse of the pound, a strong tension on the secondary market and a collapse of pension funds.
Boe further expands purchases: "Financial stability at risk"
And we'll take care of trying to put the pieces back together Bank of England which today announced the umpteenth extension of the emergency plan for the purchase of British debt worth 65 billion pounds launched on 28 September. Yesterday, the Moe already had doubled the entity maximum purchases per day, taking it from £5bn to £10bn. Today, in an attempt to calm markets and protect pension funds, the Bank of England has instead expanded its emergency intervention to indexed gilts, a type of inflation-linked government bond. In parallel, the British central bank issued a warning on the "material risk” is preferably used for financial stability of the United Kingdom. In particular, through a note, the Boe announced that “at the beginning of the week there was a significant repricing of British government debt, particularly in index-linked gilts. The dysfunction present in this market and the prospect of sell-off dynamics pose a significant risk to UK financial stability.
Despite the extraordinary interventions of the BoE, yields continue to rise with de interest ratessecurities at 30 years reached up to 4,72%.
Even the Chancellor of the Exchequer runs for cover
Meanwhile, the British Finance Minister also, kwasi kwarteng, has decided to make its move, bringing forward from November 23rd to October 31st the presentation of the fiscal budget. The anticipated date of the announcement of the maneuver will allow the markets to understand where the Government will get the money to finance tax cuts and contingency plans on bills. Despite the withdrawal of the most controversial measure, the one which envisaged reducing the maximum tax rate from 45 to 40% favoring the richest classes of the population, there are still measures worth £43 billion.
With the early presentation of the tax budgetfurthermore, the BoE will have the opportunity to take into account the tax plans and government spending before reporting la next decision on interest rates, on November 3rd. Many investors believe the bank could hike rates by a full percentage point to counter the inflationary impact of the executive-led tax cuts.
