The Bank of England has again had to intervene in the UK and financial markets everywhere are nervous and distrustful of governments.
British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng (Image: AAP/EPA/Tolga Akmen)
While the prospect of a central bank-induced global recession has captured the attention of policymakers, it’s the fragility of financial markets that poses perhaps the greatest threat to growth — and the real concern for politicians like Treasurer Jim Chalmers, who is with the conspiracy of a safe fiscal course.
The UK financial system collapsed again almost overnight due to the ongoing fallout from the Truss-Kwarteng disaster, prompting another major intervention by the Bank of England (BOE).
This was caused by a further rise in UK government bond yields that caught markets and regulators by surprise. The BOE has been forced to double its potential support buying to a massive £10bn a day to try to correct what it described as a “dysfunction” in the markets. The bank warned – for the second time in 13 days – of a “significant risk to the UK’s financial stability.” There was “the prospect of a self-reinforcing ‘fire sale’ dynamic [that] pose a significant risk to UK financial stability”.
Read more about the instability of the global financial markets.
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