17 October 2022
If you are covering the market reaction to Jeremy Hunt’s reversal of many of the measures from the mini-budget, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Jeremy Hunt has achieved the first step in returning some semblance of credibility to the government’s economic reputation as the bond markets have welcomed his announcement. It is quite remarkable that it took an almost complete scrapping of the mini-budget announced just over three weeks ago. However, that credibility is still incredibly fragile and much of the government’s next moves will depend on the OBR forecasts being produced at the end of this month. They won’t make for pretty reading but following this announcement should give investors some confidence that the UK’s finances are on a more stable footing.
“All eyes now turn to the Bank of England and its next policy move. Hunt’s statement should reduce the need for the BoE to raise rates as aggressively as it might have done, but it is still struggling to bring inflation down and as such will need to act in some shape or form. With further pressure being placed on businesses and households and the long-term challenges of slowing growth, the risk of policy mis-step only grows.
“In the short-term, however, this raises serious question marks over the future of the Prime Minister and as such further political volatility lies ahead for markets.”
