Britain has reportedly ramped up efforts to settle market chaos on Monday, following a sharply criticized budget, with the administration bringing forth key economic estimates and the Bank of England (BoE) increasing liquidity.
After the market turmoil caused by his borrowing-driven budget in September, chancellor Kwasi Kwarteng’s will announce debt reduction measures and projections earlier than anticipated.
Kwarteng made a U-turn and said that instead of publishing his medium-term budget plan in late November, he would do so on October 31 along with the estimates.
It happens after Kwarteng was compelled to cancel a tax break for the wealthiest earnings due to public outcry as millions of Britons struggled with rising costs of living due to a high inflation rate.
The newly elected Prime Minister Liz Truss's budget, which notably disclosed an expensive energy price cap for households and businesses, has alarmed the markets.
The proposals to rescue Britain's recession-threatened economy drove UK bond yields to rise and the value of the pound against the US dollar plummeted to a historic low.
Earlier on Monday, the BoE announced the opening of a temporary facility to reduce liquidity concerns brought on by the markets' shock over the budget.
The BoE revealed further steps to promote market functioning in a statement and stated that the central bank was prepared to raise the size of its emergency purchase program for UK government bonds, which is set to expire on Friday.
The BoE also announced the launch of a Temporary Expanded Collateral Repo Facility to allow banks to contribute to reducing liquidity strains facing customer funds after this week.
Due to concerns that the government debt would skyrocket to pay for the tax reductions, the budget was roundly criticized, especially by the IMF.
Last week, Fitch changed the outlook for its credit rating of British government debt from steady to negative.
Despite falling against the dollar on Monday, the pound was still above the record-low value that was just above parity.
Source credit: https://www.straitstimes.com/world/europe/britain-unveils-fresh-action-to-calm-markets-turmoil