London
CNN Business
—
British Prime Minister Liz Truss will hold a news conference on Friday amid widespread speculation that she is preparing to abandon a large part of her economic strategy unveiled three weeks ago.
Her “mini-budget” was presented by Finance Minister Kwasi Kwarteng on September 9. Promises of deep tax cuts and increased borrowing sent sterling and government bonds crashing on Tuesday on fears of further fuelling inflation at a time when prices were already rising at their fastest pace in about 40 years.
That prompted the Bank of England to warn of serious risks to Britain’s financial stability and to announce three separate interventions to quell a bond market meltdown that has left some UK pension funds on the brink of default.
The unfunded tax cuts have been heavily criticised by investors, the International Monetary Fund, credit-rating agencies and members of Truss’ own party, some of which are now reported to be talking about letting her go after just five weeks as prime minister. dismiss him.
On Friday, Kwarteng flew back from an IMF meeting in Washington, D.C., to discuss the plan with Truss.
“Following a successful series of meetings of the International Monetary Fund, the Chancellor of the Exchequer will return to London today to continue pacing the medium-term fiscal plan,” the Treasury said in a statement.
Yields on 30-year UK government bonds fell to 4.3% from a high of more than 5% in recent days as bond prices rose, while sterling last traded at $1.12. It fell to an all-time low near $1.03 in September. 26.
The Bank of England launched a 65 billion pound ($73.3 billion) emergency bond-buying program on September 9. The 28 is due on Friday, which has many market participants worried that if the government doesn’t quickly explain how it plans to pay for the tax cuts, bonds could plunge again — pushing up mortgage rates and other borrowing costs.
Under pressure, Kwarteng has brought forward its entire budget statement to October. 31, more than three weeks ahead of schedule. But investors may not be ready to wait that long for assurances about the state of Britain’s public finances.
The UK government has abandoned plans to cut the top income tax rate, and media reports suggest it may also reconsider scrapping plans to increase sales tax.
A spokesman for Truss on Thursday denied the government would “turn around” again, but Trade Minister Greg Hands said “let’s wait and see” when asked the same question on Friday.
“You’re not going to wait until October 31 for the chancellor to make these plans,” Hands told Sky News.
— Luke McGee and Zahid Mahmood in London and Xiaofei Xu in Paris contributed to this article