This intervention is Bank’s latest attempt to calm markets after pound crashand the cost of government borrowing will skyrocket.
“The Bank will make purchases of long-term government bonds“, stated the bank in a statement, in which it specifies that this “operation will be fully financed by the Treasury”.
will start to buy long-term gilts starting this Wednesday for “restore orderly market conditions“and avoid a” material risk to the financial stability of the United Kingdom, “he added.
He informed that he will also carry out temporary purchases of long-term UK government bonds. The Bank of England’s emergency intervention in the government bond market brought immediate relief to financial markets, according to British newspapers.
“A new era has begun, the markets are unstable, the economy is dire and the reputation of lawmakers has been shattered. This is the view of traders who are analyzing the UK fixed income and forex markets” , said Naem Aslam, chief market analyst of the Ava Trade trading platform, which was reported by The Guardian newspaper. He also considered that the bank’s announcement showed that the water was over their head, and that they have to do whatever it takes to lower the cost of loans, driven by interest rate updates.
“The initial announcement supposes a certain UK debt market reliefbut sterling became even more volatile. Now, the forecast is that if the current move does not temporarily put an end to the current bloodletting, the next step will be the unscheduled announcement of an interest rate hike,” he said.
After the bank’s announcement that it would buy public debt, the fall of the pound which had stabilized yesterday at 1.07 and 1.08, it was pronounced today and dropped from $1.06 to $1.05.
The pound sterling hit its 37-year low of $1.0327 on Monday after the mini-budget announced by the Finance Minister Kwasi Kwarteng on Friday. Kwarteng, for his part, told investors that the government is committed to fiscal discipline and is working closely collaboration with the Bank of England and budget analysts from the Office of Budget Responsibilitybefore delivering its medium-term fiscal plan on November 23.
Source: Ambito
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
