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talkpoliticsRishi Sunak has already assumed office as the UK Prime Minister. But that doesn't mean the financial and economic problems are solved. A hole of tens of billions of pounds is gaping in Britain's financial plan, to start with.
Britain's finance minister, Jeremy Hunt, actually wanted to present the new government's financial plans as early as last week. But the stock markets have calmed down a bit since then, giving the cabinet the opportunity to publish those plans a little later - possibly on November 17th. Then the current forecasts for economic development will be available, and this will strengthen the foundations of all the financial planning, at least that's what the Ministry of Finance is hoping.
After Hunt canceled those plans last week, the yield on 30-year British government bonds has risen, although it then fell back slightly again. Still, the government got at least a breath of fresh air. For now.
It's understandable that Sunak has delayed the release of the financial planning. He just wants to look very carefully at all the options. The first reactions of the financial markets have shown that the new government has managed to regain a large part of the lost confidence almost overnight. We'll see where this goes in the longer run.
Because, you know, the challenges facing the cabinet are still gigantic. A gaping hole of £30bn to £40bn has been left in their financial plans. So the finance minister and the new prime minister have yet to find something to plug this whole with. "I will put financial and political stability and trust at the center of my program," Sunak said in his first speech as prime minister. And also: "That means there will be tough decisions to make." So better be prepared to tighten your belts, Britons!
That's why the prime minister didn't want to promise that social benefits would be updated because of inflation. A temporary freeze on pensions is also being discussed. All nice stuff that people are gonna love.
Let's face it, the risks for the financial markets are far from being under control. The Bank of England has to make a decision on the key interest rates soon (actually November 3rd), but at that moment they won't yet know what the cabinet's financial plans would really look like. The head of the bank, Andrew Bailey, has said that in this situation, the National Bank should move to autopilot mode - precisely because there is no information about the financial intentions of the government.
In such case the bank can raise the interest rate much more than it would in other circumstances. So we can probably expect an increase in the key interest rate by 0.75% or even 1%. The motive for such a decision: to control inflation and reduce the risk of new serious shocks on the financial markets.
Add the unstable international situation at the moment to all this, which also affects market rates and bond rates. In the meantime, Rishi Sunak is finding himself caught between a rock and a hard place at home as he must both announce austerity measures AND boost economic development. And these two goals are largely mutually exclusive.
The new government has also reiterated previous promises that the benefits of Brexit would now start to be felt: bureaucratic obstacles for businesses will be reduced and the new cabinet will try to conclude more bilateral trade agreements. But so far these intentions have not taken any concrete shape, so you might understand why Britons are growing overly anxious about all this.
Britain's finance minister, Jeremy Hunt, actually wanted to present the new government's financial plans as early as last week. But the stock markets have calmed down a bit since then, giving the cabinet the opportunity to publish those plans a little later - possibly on November 17th. Then the current forecasts for economic development will be available, and this will strengthen the foundations of all the financial planning, at least that's what the Ministry of Finance is hoping.
After Hunt canceled those plans last week, the yield on 30-year British government bonds has risen, although it then fell back slightly again. Still, the government got at least a breath of fresh air. For now.
It's understandable that Sunak has delayed the release of the financial planning. He just wants to look very carefully at all the options. The first reactions of the financial markets have shown that the new government has managed to regain a large part of the lost confidence almost overnight. We'll see where this goes in the longer run.
Because, you know, the challenges facing the cabinet are still gigantic. A gaping hole of £30bn to £40bn has been left in their financial plans. So the finance minister and the new prime minister have yet to find something to plug this whole with. "I will put financial and political stability and trust at the center of my program," Sunak said in his first speech as prime minister. And also: "That means there will be tough decisions to make." So better be prepared to tighten your belts, Britons!
That's why the prime minister didn't want to promise that social benefits would be updated because of inflation. A temporary freeze on pensions is also being discussed. All nice stuff that people are gonna love.
Let's face it, the risks for the financial markets are far from being under control. The Bank of England has to make a decision on the key interest rates soon (actually November 3rd), but at that moment they won't yet know what the cabinet's financial plans would really look like. The head of the bank, Andrew Bailey, has said that in this situation, the National Bank should move to autopilot mode - precisely because there is no information about the financial intentions of the government.
In such case the bank can raise the interest rate much more than it would in other circumstances. So we can probably expect an increase in the key interest rate by 0.75% or even 1%. The motive for such a decision: to control inflation and reduce the risk of new serious shocks on the financial markets.
Add the unstable international situation at the moment to all this, which also affects market rates and bond rates. In the meantime, Rishi Sunak is finding himself caught between a rock and a hard place at home as he must both announce austerity measures AND boost economic development. And these two goals are largely mutually exclusive.
The new government has also reiterated previous promises that the benefits of Brexit would now start to be felt: bureaucratic obstacles for businesses will be reduced and the new cabinet will try to conclude more bilateral trade agreements. But so far these intentions have not taken any concrete shape, so you might understand why Britons are growing overly anxious about all this.
