Kwasi Kwarteng is starting a new effort to calm panicked markets today, as the pound continues to fall in the wake of an unexpected IMF intervention.
The Chancellor will meet with investment banks after his tax-cutting Budget frightened speculators, causing government borrowing costs to skyrocket and battering the pound.
The currency rebounded after hitting a record low of $1.03 on Monday, but sank again this morning as the IMF criticized the “large and untargeted” budget package.
After the international group advised Mr. Kwarteng to reverse his tax cuts in his next mini-Budget on November 23, Tories responded angrily.
In a conversation with dozens of Conservative MPs last night, Mr. Kwarteng attempted to calm their worries by emphasizing the need for ‘cool heads’ and asserting that the government can “see this through.”
Later, Kwasi Kwarteng will meet with investment banks after his tax-cutting budget alarmed investors.
The currency rebounded after hitting a record low of $1.03 on Monday, but sank again this morning as the IMF criticized the “large and untargeted” budget package.
This morning, Sterling slipped down to $1.06 after recovering to $1.08 yesterday.
There are rising concerns that the currency will reach parity with the U.S. dollar if the British government is unable to halt the decline.
The dollar has been tremendously strong across the globe, but despite this, the Pound has struggled.
Treasury officials were enraged by the IMF’s intervention the day after markets had stabilized and some government bonds had risen.
Former Cabinet member Lord Frost, a close supporter of Liz Truss, stated that the organization had always supported “traditional” growth-stifling policies.
He told the Telegraph that the Prime Minister and Chancellor should ignore the criticism.
One Conservative member of parliament stated, “Ultimately, it is up to the elected government to determine budgetary policy.” I am convinced that ministers will foster economic expansion.
In response to the criticism, a Treasury spokeswoman stated, “We acted swiftly to protect people and businesses through this winter and the next, following the enormous increase in energy prices caused by (Vladimir) Putin’s criminal activities in Ukraine.”
The Government was “committed on developing the economy to increase living standards for everyone,” and the Chancellor’s announcement on November 23 “would provide additional specifics on the Government’s fiscal guidelines, including ensuring that debt as a proportion of GDP reduces in the medium term.”
Mr. Kwarteng told City investors yesterday that he is “confident” that the £45 billion tax cuts, the largest in fifty years, will be successful.
Today, he is likely to emphasize to investment bankers that ministers are pursuing change to boost economic growth, including “Big Bang 2.0” steps to remove red tape for the City.
After launching a scathing attack on the Government’s tax-cutting mini-Budget, the International Monetary Fund was ordered to keep its nose out of British affairs yesterday night.
As the Bank of England prepares to raise interest rates, there are growing concerns about a potential mortgage catastrophe.
Lenders have removed dozens of items as they struggle to respond to rising cost expectations.
Investors anticipate an increase of up to 1.5 percentage points in interest rates at or before the next meeting of the Monetary Policy Committee of the Bank of England in early November.
The Bank’s chief economist Huw Pill cautioned that Threadneedle Street “cannot remain inattentive” to recent events, which are interpreted as a hint that the cost of borrowing will have to rise to preserve the pound and contain inflation.
Mr. Pill stated, “It is difficult to avoid the conclusion that all of this will necessitate a strong monetary policy reaction.”