Sterling rises as Treasury Secretary announces policy
Jeremy Hunt arrives at his London home after being appointed treasurer after Kwasi Quarting’s resignation. Photo date: Friday, October 14, 2022.
Aaron Chun | Pascal | Getty Images
London – pound to revolt against him dollar Monday morning after new British Chancellor of the Exchequer Jeremy Hunt announced that he will present parts of his medium-term budget plan later in the session.
Sterling rose nearly 1% to $1.1288 early Monday morning, extending gains following the British Treasury’s statement.
The decision comes after a dramatic day in British politics on Friday, which included major fiscal shifts by Prime Minister Liz Truss and the resignation of Chancellor of the Exchequer Kwasi Quarting. Hunt quickly replaced him and is expected to make a statement Monday at 11 a.m. local time.
Monday’s announcements come two weeks earlier than scheduled. However, the full medium-term financial plan was not released by October 31, accompanied by forecasts from the Independent Office for Budget Responsibility – something not included in the original mini-budget announced on September 23, which lifted UK markets.
Hunt said last week that his priority as Treasurer was growth, like his predecessor, but made clear that growth would be “supported by stability.”
“The drive to grow the economy is right – it means more people can get good jobs, new businesses can thrive, and we can guarantee world-class public services. But we’ve gone too far, too quickly,” Hunt said in a statement on Saturday.
Biden: The original plan was a ‘mistake’
The International Monetary Fund issued a harsh ruling on debt-financed tax cuts after they were first announced in late September. The UK saw a sharp sell-off and the Pound hit a record low in the following days.
In a rare statement, the IMF said the UK’s plans were “likely to increase inequality” and emphasized that it “does not recommend large, untargeted fiscal packages at this time”.
US President Joe Biden threw his weight on the UK economy this weekend, calling Truss’ now-abandoned tax-cutting plan a “mistake” and also worried that other countries’ monetary policies could hurt the US.
“I wasn’t the only one who thought it was a mistake,” Biden said. I don’t agree with the policy, but it’s up to Britain.”
Biden also said he “expects” Truss to back down on the plans. He spoke to reporters at an ice cream parlor in Oregon on Saturday.
On Friday, Truss announced a partial reversal of the so-called mini-budget, which includes scrapping a commitment to scrap a corporate tax increase. Corporate taxes are now being raised from 19% to 25% as originally planned by the government of his predecessor Boris Johnson.
“It’s clear that parts of our mini-budget have gone further and faster than the markets expected,” Truss said at a brief, hastily arranged news conference on Friday.
Markets are not sure about this move. However, the pound was down about 1.1% against the dollar after the gear shift, trading around $1.1205. Several political observers highlighted her poor performance on Friday, putting pressure on Truss and some lawmakers calling for her to resign.
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