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☆ To fix Britain, Labour will need new debt rules
▼ + stars: | 2023-09-29 | by ( Francesco Guerrera | ) www.reuters.com time to read: +7 min

Having fiscal rules – and sticking to them – is crucial for governments. The Bank of England expects anaemic GDP growth of 0.5% next year and 0.25% in 2025, and long-term growth of just 1%. Reuters Graphics Reuters GraphicsThe Labour leadership is concerned that rewriting debt rules would unsettle bond investors still scarred by Truss’s fiscal follies. What Britain’s next government shouldn’t do is obsess about restrictive fiscal rules at the expense of investments that could get the country out of its current hole. The reports said that Sunak was looking at scrapping the portion of the project linking the northern cities of Manchester and Birmingham because costs have been soaring from the original 55.7 billion pounds to an estimated 106 billion pounds.

Persons: Grant Shapps, Liz Truss, Rishi Sunak, Jeremy Hunt, Hunt, Keir Starmer, Worth ”, Ian Ball, Willem Buiter, John Crompton, Dag Detter, Jacob Soll, Crompton, Breakingviews, PSNW, –, Rachel Reeves, Labour’s, “, Reeves, Britain’s, Sunak, George Hay, Oliver Taslic Organizations: Reuters, Sunday, Sky News, Labour, Conservative, Bank of England, Sunak’s, Worth, Reuters Graphics Reuters, Britain’s, Thomson Locations: Britain, New Zealand, Zealand, Manchester, Birmingham

But as some argue, in its quest to avoid another taper tantrum, the Fed delayed that two-pronged tightening too long, which has partly contributed to the stickiness of inflation today. This lengthy buildup may have averted another taper tantrum, but tied the Fed's hands on raising rates even as inflation was roaring back. Markets thought this not only meant the Fed would soon "taper" its bond purchases, but also raise interest rates. The Fed and markets have learned their lessons from the taper tantrum. Maybe the taper tantrum illustrates that it wasn't as planned and consistent as it should have been," he said.

The Fed's relentless interest rate-raising campaign, and resulting worldwide surge in the dollar, is tightening global financial conditions at an alarming pace. Many feel this should put global financial leaders on the highest contagion alert. China's central bank has asked major state-owned banks to be prepared to sell dollars overseas to stem the yuan's descent. chartchartEINSTEIN & INSANITYThere are signs that the recent global market turmoil is opening eyes in Washington. Perhaps surprisingly then, the last time G7 central banks acted together in FX was in 2001, selling yen for dollars.

British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit Berkeley Modular, in Northfleet, Kent, Britain, September 23, 2022. The pound crashed below $1.09 for the first time since 1985 and British government bonds suffered the biggest daily fall in decades. "I've rarely seen an economic policy that is as uniformly panned by economic experts and financial markets," said Harvard professor Jason Furman, former chair of the U.S. Council of Economic Advisers during Barack Obama's presidency. Britain's Institute for Fiscal Studies compared Kwarteng's statement to a budget in 1972 that similarly sought to double Britain's rate of economic growth, but is widely remembered as a disaster for its inflationary effect. Furman said Truss might also have no choice but to undo some of her plans if Britain's debt problems start to spiral because of higher interest rates.

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