Less than a month after the new British Prime Minister, Liz Truss took office, she immediately launched the biggest tax cut in 50 years in a “budget”, in an attempt to stimulate economic growth with “shock therapy”. However, the stimulus to growth failed to bear fruit, but instead got on the nerves of investors, causing the pound’s exchange rate to collapse for a time, falling sharply to the lowest level in history. Government officials disappeared en masse at the beginning of last week when the market was in turmoil. Even after Zhuo Huisi and Kwasi Kwarteng who are involved in finance started giving interviews, the tough stance of refusing to change the situation failed and the hesitant response to restoring confidence. of the people. , the new prime minister’s popularity plummeted to just 15%.
The New Deal managed to save the market, the Bank of England’s help
Hao Ting, the newly appointed financial officer, went to Congress on the 23rd of last month to read aloud the “2022 Growth Plan”, dubbed the “Mini Budget” by the world outside of tax cuts on scale as the main axis to stimulate economic growth.
However, with inflation at a 40-year high in the UK, investors are concerned that the authorities are currently injecting money into the economy through the supply side, which could push inflation higher and cause the pound depreciated sharply. The British pound plunged to a 37-year low on the day the policy was announced, but the decline continued until the beginning of last week. The lowest price against the US dollar was 1.0327, and the pound fell below 8.2 against Hong Kong dollar .the lower part.
In the context of “big water” freezing household electricity bills for two years, Guan Haoting demanded a tax cut before the Office for Budget Responsibility (OBR) released the latest economic forecast, which meant the authorities announced borrowing of under the unknown economic condition of prospects, triggering a crisis of confidence in the market Government bonds were suddenly sold. From the policy announcement on the 23rd to last Wednesday (28th) in just four trading days, the yield on the 10-year Treasury bond rose 120 basis points to 4.6%, the biggest increase in five days since 1976.
The surge in government bond yields represented a fall in the value of UK government bonds, fueling bankruptcy fears for debt-driven pension funds. Faced with this, the Bank of England stepped in to rescue the market on Wednesday, announcing an “unlimited” buyback of 20-year and 30-year government bonds related to pension funds, and finally managed to stem the tide of selling.
Officials quietly lost Zhuo Kui hesitant
Compared to the Bank of England, which intervened, the British government has done little in the past week. At the beginning of the week when the pound exchange rate collapsed, airwaves from the minister of state down to the junior minister were almost completely wiped out, and the finance-related Hao Ting also avoided questions when he was “fuked” by reporters on the street, only to say that he would not comment on the situation. However, as the ruling Conservative Party held its annual party conference this week, Mr Zhuo Huisi, the party’s leader, had already arranged a routine radio interview ahead of the meeting, which gave the media an opportunity to ask the prime minister, who has not seen him, on Thursday.
The eight hosts of the regional radio show asked insightful questions, including “Where have the last few days been?”, “Are you ashamed of what you’ve done?”, “How can tax cuts for rich and rising mortgage rates help the country?” family?” etc. Faced with the boiling public complaints, Zhuo Huisi seemed unprepared, pausing for a few seconds before answering many times, hesitating, and more often than not mistakenly saying that British households could not pay more than £2,500 per year (about £2,500 per year) due to the electricity bill freeze policy 22,000 HKD) electricity bill. In fact, what has been frozen is the cost per kilowatt-hour of electricity, and the figure of £2,500 based on average household electricity use, even if consumers who use a lot of electricity actually pay higher electricity bills.
Companies refuse to turn people’s hopes down
Zhuo Huisi did not let go in the radio interview, but only repeated his consistent position, saying that people will always oppose a certain measure, but even if the decision is difficult, it must continue, stressing that the policies drawn up by the authorities correctly, and what cannot be done is to let the situation be Development is not interfering, and what the UK needs is to create high paying jobs through economic growth. Writing in The Sun on Friday, Zhuo Huisi admitted the difficult decision involved short-term “chaos”, but called on the public to trust the authorities, promising to firmly manage the country’s finances, and to explain within the month how to reduce in the medium term. Finance-related Hao Ting also pointed out in the Daily Telegraph that the “Medium Fiscal Plan” announced by the authorities on November 23 will be a “credible plan” to bring public finances back on track and promise to observe financial discipline.
After the Bank of England announced the bailout, the sterling exchange rate recovered to the level before the turmoil on Friday, against US$1.1234, and the prices of the 20-year and 30-year government bonds that were also bought stabilized, but the price. of 20-year and 30-year government bonds that were not repurchased also stabilized. The yield on one-year and 10-year Treasury bonds remained high, remaining above 4%.
Although authorities have been able to calm markets for the time being, they appear to have failed to quell national discontent. Support for the ruling Conservative Party fell by 7 points to 21%, according to the latest YouGov poll released on Friday, trailing Labor by 33 points and the widest gap between the two parties since the 1990s. The support rate for Zhuohuisi dropped to 15%, and 65% of respondents believed the new prime minister was incompetent.
With the government’s popularity plummeting, Conservative MPs are worried about the general election just two years away. Some analysts believe that if the authorities fail to explain the policy clearly this weekend, especially how to reduce the deficit rate, the Conservative Party’s 4-day annual party conference starting on Sunday will be difficult OK for Zhuo Huisi and Guan Haoting Great pressure within the party.
Source: Comprehensive report
Text by FORTUNE INSIGHT
