Trading in Britain’s battered government bonds resumes at 8am (0700 GMT) on Monday, the first day that trading in long-dated debt will not be supported by emergency Bank of England bond-buying which began on Sept. 28 and expired on Friday.
“MEETING OF MINDS”
Any bond market respite is likely to prove fragile before Hunt announces a new budget plan on Oct. 31.
The budget will aim to narrow a hole in public finances that the Sunday Times reported is as big as 72 billion pounds ($80.4 billion), including the 45 billion pounds of tax cuts originally planned by Truss, only about 20 billion pounds of which have so far been reversed.
BoE Governor Andrew Bailey gave Hunt a vote of confidence on Saturday, saying they had an “immediate meeting of minds” on the need to fix the public finances.
But Bailey also said interest rates would probably have to go up sharply next month, even with the economy likely to go into a recession soon.
Goldman Sachs said on Sunday it expected Britain’s economy to shrink by 1.0% in 2023, a more severe contraction than its previous forecast of a 0.4% shrinkage, as Truss’s tax cuts were reversed.
Former finance minister George Osborne, who oversaw a tight squeeze on spending for six years until the 2016 Brexit vote, said the last six years of political upheaval in Britain were taking its toll on the economy.
“That is how the rest of the world looks at it,” he told Channel 4 television. “You have this unreality in the British political system – they don’t want to address the fundamental deterioration in the UK’s economic position in the world.”