David Milliken and Mark Jones
LONDON (Reuters) – The Bank of England may take a swipe at the massive tax cuts by Finance Minister Quasi Kwaten “Significant policy response” but wants to wait until BoE chief economist Huw Pill said on Tuesday that no action will be taken until the next scheduled meeting in November. On Friday, when he announced sweeping tax cuts to kickstart the economy, the pound tumbled and U.K. government bond yields soared.
“I do want to make it clear at this point that, in my view, the fiscal announcements we’re seeing are going to be stimulating,” Peel said at Barclays-CEPR International Monetary Policy in London. said on the forum.
“It’s hard not to conclude that this will require a significant monetary policy response,” he added, adding that financial market turmoil will have a major impact on the economy, d being included in the next BoE forecast .
Some investors and economists said it was time for the Bank of England to hold an emergency meeting and raise interest rates sharply to support the value of the pound and limit further inflationary pressures.
Pill conceded that the Nov. 3 date for the BoE’s next scheduled policy announcement appeared to be a long way off, but said the central bank had better take a “more thoughtful approach, less frequent” Methods”.
Meanwhile, the Bank of England will rely on communicating its intentions, an approach that, he said, would need to respect the central bank’s independence from government.
Separately published on Tuesday, Kwarteng told bankers, insurers and asset managers he was “confident” his economic strategy would work, stressing the need to work closely with the Bank of England.
On Monday, Governor Andrew Bailey said the Bank of England would “have no hesitation” in raising interest rates if needed, but added that the Monetary Policy Committee would fully assess the situation at its November meeting.
“challenging” market
GBP/USD was higher on Tuesday, hitting a record low a day later.
U.K. government bonds suffered their biggest sell-off in decades on Friday and Monday, recovering some of their losses early on Tuesday, but fell again after Peel’s comments.
30-year yields rose nearly 5%, their highest level since 2002, up more than 45 basis points on the day, while 20-annual gilt rose more than 36 basis points.
Pill said the market was “challenging” but suggested the Bank of England was not prepared to stop plans to sell government bonds from the huge debt reserves it has acquired as part of stimulus measures since the global financial crisis.
” I understand the current market environment is challenging for many. But I also think – as long as it’s just an orderly re-run of fundamentals Pricing – I think QT can and should continue to be in this environment.”
The Bank of England had previously said it would set a “high bar” for any changes to its quantitative tightening schedule to sell its bond investments combination.
