London, Sept 28 (AFP/APP): The Bank of England stepped in Wednesday to shore up market confidence after the International Monetary Fund criticized Britain’s inflation-fighting budget.
Reacting to markets turmoil, the BoE announced it was temporarily buying up long-dated UK government bonds “to restore orderly market conditions”.
However, the pound promptly slumped 1.7 percent to $1.0552.
The BoE intervention followed criticism Tuesday from the IMF, which argued that Britain’s budget could increase inequality and worsen inflation.
Credit ratings agency Moody’s also waded in overnight with a warning about soaring debt.
Finance minister Kwasi Kwarteng’s big tax cuts and energy price freeze, aimed at boosting the UK’s recession-threatened economy, appeared to have had the opposite effect as traders warn of ballooning debt to pay for the incentives.
Following last Friday’s budget, UK government bond yields have soared and the pound hit a record low at $1.0350.
Critics added that Kwarteng’s measures would benefit the rich more than the poorest, as millions of Britons suffer from a cost-of-living crisis.
“We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise,” the
Treasury said as it sought to defend itself.
“We are focused on growing the economy to raise living standards for everyone,” it added.
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