Former Bank of England chief says new government has undercut other institutions

Former Bank of England chief says new government has undercut other institutions

KEY WORDS

Former Bank of England Gov. Mark Carney said the U.K. government was undercutting other institutions.

In an interview with the BBC, Carney said the tax cuts unveiled by Chancellor Kwasi Kwarteng worked at cross purposes with the Bank of England’s goal of bringing inflation down.

The so-called mini budget also was not accompanied by an Office for Budget Responsibility forecast of its impact. The Treasury now says an OBR forecast will come in November.

Carney also said there’s a lack of detail on measures to drive growth, and there’s a possibility of spending cuts to offset tax cuts. “Unfortunately having a partial budget, in these circumstances — tough global economy, tough financial market position, working at cross purposes with the Bank — has led to quite dramatic moves in financial markets.”

The pound earlier this week hit a record low of $1.0349, and its current level of $1.0862 is still far below the $1.15 mark before Kwarteng, and Prime Minister Liz Truss, took office. Truss gave a series of interviews to local radio stations in which she defended her economic policies.

The Bank of England on Wednesday scrapped a plan to sell gilts, and instead announced it was buying longer-dated bonds for the next two weeks, in what analysts say headed off a potential crisis with pension funds.

The yield on the 30-year gilt edged up 3 basis points to 3.95%, after a historic 106 basis point decline on Wednesday.

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