Bank of England 'will not hesitate' to act as it monitors market turmoil



*

Pound briefly touched a record low against dollar

*

Five-year gilts match Friday's record daily slump

*

Yields on 2-year and 5-year debt up 100 bps in 2 days

*

Finance minister to detail fiscal plans on Nov. 23

*

BoE monitoring developments 'very closely'

*

UK lenders to pull mortgage products amid turmoil

By Amanda Cooper, David Milliken and Andy Bruce

LONDON, Sept 26 (Reuters) - The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets "very closely", after the pound plunged to a record low and British bond prices collapsed in response to the new government's financial plans.

Finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a so-called mini-budget that was designed to grow the economy by funding tax cuts with huge increases in government borrowing.

Such was the market turmoil on Monday there was growing speculation in financial markets that the BoE would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.

Instead, with the pound fragile and bond prices still tumbling, Kwarteng issued a statement just before the British stock market closed to say he would set out medium-term debt-cutting plans on Nov. 23, alongside forecasts from the independent Office for Budget Responsibility of the full scale of government borrowing.

The central bank welcomed "the commitment to sustainable economic growth" from Kwarteng and the independent scrutiny that the OBR growth and borrowing forecasts would bring.

"The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said.

"The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit."

U.S. Federal Reserve official Raphael Bostic said the market moves could lead to greater economic stress in Europe and the United States, while analysts and investors said the government had done the bare minimum to reassure markets.

"There seems no reason to believe that markets will give the government the benefit of the doubt ahead of a new fiscal plan by Kwasi Kwarteng," said Chris Scicluna, head of economic research at Daiwa Capital Markets.

"The market could force their hand and there still could be an emergency rate hike before the next BoE meeting," he said, referring to the next scheduled policy announcement on Nov. 3.

INTENSE PRESSURE

The Treasury and central bank statements came towards the end of a day of turmoil for Britain's currency and debt.

While the pound plunged by as much as 5% against the dollar to touch $1.0327, its weakest on record, in Asian trade, it had pared most of the day's losses in European trading on hopes of an emergency rate hike. GBP=D3 GBP=

The statement at the close of trading on Monday pushed the pound back to as low as $1.0645 from $1.0820. Sterling was trading at $1.0680 at 1644 GMT, down 1.6% on the day.

In the market for British government bonds, or gilts, the pressure had been even more intense, with five-year bond prices GB5YT=RR recording their joint-biggest daily fall since at least 1991, matching Friday's historic slump.

The five-year gilt's yield GB5YT=RR - the cost for the British government of new borrowing over five years - reached its highest since September 2008 at 4.603%, and has risen a full percentage point in the last two trading days as Prime Minister Liz Truss's government lost credibility with investors.

"The reaction to the proposed plan is a real concern and a fear that the new actions will add uncertainty to the economy," Atlanta Fed President Bostic told the Washington Post.

"The key question will be what does this mean for ultimately weakening the European economy, which is an important consideration for how the U.S. economy is going to perform."

With markets remaining hugely volatile, British lenders Halifax, Virgin Money and Skipton Building Society withdrew mortgage products from the market.

Gilt yields showed little reaction to the BoE and government statements, but very short-term interest rate swaps GBPSWOIS=ICAP slashed the odds of an emergency rate rise in the coming week.

Mohamed El-Erian, chief economic adviser at Allianz, had earlier said the central bank would have no choice but to raise interest rates if Truss and Kwarteng did not back down.

"And not by a little, by 100 basis points, by one full percentage point to try and stabilise the situation," he told BBC Radio.

Truss, Britain's former foreign secretary, was elected as prime minister earlier this month by a vote of the Conservative Party's 170,000 members - not the broader electorate - after an internal party rebellion that drove Boris Johnson out of power.

She largely beat her rivals to the top job by vowing to reignite economic growth through tax cuts and deregulation to bring an end to the largely stagnant real wage growth that has marked her party's 12 years in government.

Her pledge to end so-called "Treasury orthodoxy" and go for growth marked a step change in British financial policy, harking back to the Thatcherite and Reaganomics doctrines of the 1980s.

"Markets go up and down," one veteran Conservative Party source said on Monday, declining to be named. "We did something structural, short term, that will have seismic and positive long term benefits."

Further highlighting the extent to which investors have punished UK assets, the difference in 10-year borrowing costs for the British and German governments exploded to its widest since 1992, when Britain crashed out of the European Exchange Rate Mechanism.

British 10-year government bond prices are now on track for their biggest slump in any calendar month since at least 1957, according to a Reuters analysis of Refinitiv and BoE data. .FTSE



Britain's fiscal plan sends sterling skidding to all-time low

FACTBOX-Pounded: A history of UK currency crises and crashes

INSTANT VIEW-Britain's pound skids to record lows in firesale of
UK assets



Writing by Kate Holton and Amanda Cooper; additional reporting by Muvija M, Elizabeth Piper, Kylie MacLellan, Andy Bruce and Harry Robertson; Editing by Hugh Lawson, Mark Potter, Toby Chopra and Alexander Smith

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。

所有缐上交易平台所發佈的資料,僅適用於教育/資訊類用途,不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議,或是交易價格紀錄,或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。

本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。

風險提示:您的資金存在風險。槓桿商品並不適合所有客戶。請詳細閱讀我們的風險聲明