December 8, 2022

Taylor Daily Press

Complete News World

The Bank of England sounds the alarm about the British economy, and takes unprecedented measures

The Bank of England sounds the alarm about the British economy, and takes unprecedented measures

The panicked reaction came after news that pension funds were in danger of getting into trouble. There is also tension in the housing market. Since the British government took no action, the Bank of England decided to intervene by buying government bonds in order to stem the rise in interest rates. Wednesday’s emergency bank intervention led to a slight drop in interest rates on UK government bonds once again.

This situation is unique by British standards. The chaos is the result of Finance Minister Kwasi Quarting’s intention to borrow 50 billion euros to fund the tax cuts. Since this gamble by the Conservative government, the British economy has been in dire straits. The pound is going down, government debt is going up and interest rates are going up.

The International Monetary Fund announced, on Tuesday evening, its concerns about the financial path of the British government. US President Joe Biden and the credit rating agency Moody’s also questioned Britain’s share price during the past 24 hours. What the government is doing in London goes against all existing macroeconomic laws.

Britain’s public finances have long been in a precarious state due to the war in Ukraine and the printing of hundreds of billions of pounds during the coronavirus lockdowns. The decision to spend so many billions on tax benefits that primarily benefit the rich seems to have been the straw that broke the camel’s back.

Prime Minister Liz Truss and Minister Kwarteng are under mounting pressure to withdraw their tax plans. If they did, it would be a huge shame for the newly appointed government. Tax cuts are at the heart of government policy.

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emergency meetings

There are now fears that the British government has lost control of the economy. Truss, described by former government adviser Dominic Cummings as a “human grenade,” remained silent. Meanwhile, Kwarteng held emergency meetings with British and American bankers.

Bankers are asking the Treasurer to present an economic growth plan for the British economy soon, rather than in November as he plans to. There is a possibility that Kwarteng will come up with significant austerity measures, arguing that financial markets are forcing him to do so.

Opposition leader Keir Starmer believes the British Parliament should meet in an emergency session. Because of the caucuses, there is now a three-week parliamentary recess. You messed things up inside the Conservative Party. Many party members have already lost faith in Truss – Boris Johnson’s successor has not been in 10 Downing Street for a month.

Former Finance Minister Rishi Sunak, who has warned of this financial mess, has said he will avoid the upcoming conference of his Conservative Party. Other conservative leaders also avoid the party convention like the plague.

housing market

From America, former Chancellor of the Exchequer Larry Summers stated that Britain will be remembered as the country with the worst macroeconomic policies in a long time. Financial plans are already having an impact on the housing market. Earlier this week, British banks took nearly thousands of different mortgage products off the market. Homeowners and flexible mortgages face a serious problem if, as expected, the Bank of England raises interest rates further in the coming weeks.

Conservatives criticized the International Monetary Fund on Wednesday. “The IMF has consistently championed conventional economic policies over the years,” said former Brexit negotiator and Truss supporter, Lord Frost. “This approach has led to years of slow growth and poor work productivity.” Conservative commentator Ian Martin questioned why the IMF didn’t say anything when the money press was operating at full capacity during the pandemic.