In early morning trade, the British pound fell by more than one percent against the dollar to a low of $1.0763, as Liz Truss said the mini-Budget was the ‘correct thing’ to do despite financial turbulence.
After the Bank of England (BoE) intervened on the bond markets to avert a new financial disaster by purchasing long-term government bonds to calm the markets, sterling fell on Thursday and the FTSE-100 fell by about 2 percent.
After over a week of mayhem on the financial markets, Prime Minister Liz Truss broke her quiet to defend her economic plan, stating that she was willing to take ‘difficult’ moves to revive economy and would not change course.
In a series of appearances with local BBC radio stations on Thursday morning, she stated, “This is the proper approach we’ve devised.”
Ms. Truss responded, “I do not accept the premise of the question,” when asked if she would rescind the mini-budget that stunned markets with the magnitude of its tax cuts and government borrowing.
‘We are confronting severe economic circumstances. I do not dispute this. This is a worldwide issue. However, it is only appropriate that the British government has intervened and taken action during this terrible period.
Prime Minister Liz Truss continued to defend her economic plan on Thursday, stating that she was willing to adopt ‘controversial’ measures to revive economic development.
In defense of her tax-cutting budget, the prime minister stated that the government must take quick steps to spark economic growth.
She stated on BBC local radio that the strategy was intended to improve Britain’s long-term trajectory and that she was prepared to make painful decisions to assist people and businesses through what is anticipated to be a very challenging winter.
She indicated that the government worked closely with the Bank of England.
During an interview, Ms. Truss was asked if it was time to reverse the mini-budget. She responded, “No, it’s not because…the majority of the package we presented on Friday was the help on energy for individuals and businesses, and I believe it was absolutely the right thing to do.”
She stated, “I must do what I believe is best for the country,” adding that she is willing to make difficult decisions.
Wednesday, the British central bank pledged to purchase as many long-term government bonds, or gilts, as necessary to calm markets, which have been beset by concerns that last week’s UK budget could result in a debt explosion.
Lee Hardman, an analyst at MUFG, stated that the BoE’s action “clearly increased the level of concern about the possible negative economic and financial market consequences from the lack of confidence in the UK’s public finances.”
Ms. Truss stated on BBC local radio that the proposal was intended to improve Britain’s long-term trajectory.
On Monday, bond rates soared and the pound plummeted to a record low of $1.0350 as speculators feared the budget would derail public finances. The budget’s tax cuts and energy price freeze were intended to stimulate the UK’s recession-threatened economy.
The Bank of England took this action after the International Monetary Fund criticized the United Kingdom’s recent budget, suggesting that it could exacerbate inequality and inflation.
Last week, Kwasi Kwarteng, the minister of finance, unveiled a plan to slash taxes without defining the impact on the public finances or how the government would transform the economy to stimulate growth, which shook the financial markets.
The pound plummeted and rates on British government bonds rose, compelling the Bank of England to relaunch its bond-buying program on Wednesday as an emergency measure to support pension funds.
Ms. Truss stated that the government must take immediate and decisive measures to shield people and businesses from rising energy costs.
Naturally, this entails making contentious and challenging choices. However, I am willing to do so as prime minister since it is my top priority to get the economy rolling.’