The Brief: Chancellor Kwarteng met with some of London’s largest financial firms during his first series of roundtable discussions to explain his commitment to his growth plans while exercising fiscal discipline. The attendees, who refused to be identified, asked the chancellor to provide regular communication to the business community to stabilise the ongoing market crisis.
Why It Matters: The Bank of England (BOE) has just suspended its gilt selling and pledged to buy long-dated bonds of up to £5 billion each day for the next 13 working days. BOE’s emergency action is a response to the market mayhem that began last week when Kwarteng announced his fiscal package and plans of more tax cuts to be implemented in the coming months. The bond market has since rebounded after BOE’s announcement.
Finanze® Foresights: The market frenzy is an indication that investors are looking to make sense of things and get a deeper understanding of the strategy unleashed by Truss and Kwarteng. By early November, we’re expecting another interest rate hike from the BOE, which will feed into mortgage rates and impact the property market yet again. As mentioned previously, Kwarteng’s call for the public to remain calm will only materialise if the general public are properly informed of his plans. Constant communication with them and reassurance as things develop are also advisable (as requested by the City’s top investment bankers) would also not go amiss.
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