- Liz Truss’s new finance minister, Jeremy Hunt, has improved the market mood.
- Jeremy Hunt promises to focus on growth underpinned by stability.
- Goldman Sachs lowers its 2023 UK economic growth outlook from a 0.4% decline to a 1% decline.
British pound (6B) futures prices rose on Monday after the announcement that Chancellor Jeremy Hunt will make a statement later in the day, accelerating tax and expenditure measures to reassure the markets.
The move comes after a rough day in British politics on Friday that saw Prime Minister Liz Truss make significant budgetary U-turns and Finance Minister Kwasi Kwarteng fired. He was promptly replaced by Hunt, who is scheduled to provide a statement on Monday at 11 a.m. local time.
Like his predecessor, Hunt stated over the weekend that growth is his priority as finance minister, but he added that it will be “underpinned by stability.”
“The drive on growing the economy is right – it means more people can get good jobs, new businesses can thrive, and we can secure world-class public services. But we went too far, too fast,” Hunt said in a statement released Saturday.
There has been a change in sentiment in the bond market, and investors hope Hunt will do a better job. This is also a sign that the UK government is starting to rebuild the lost trust in the markets.
The International Monetary Fund offered a critical assessment after the massive debt-funded tax cuts were initially revealed in late September. The days that followed saw the pound hitting a record low as UK bonds experienced a severe sell-off.
The IMF made a rare public comment stating that the UK’s proposed measures will “likely worsen inequality” and emphasized that it does “not favor large and untargeted fiscal packages at this stage.”
Following the mini-budget, the Bank of England intervened to stabilize the financial markets by introducing an emergency bond-buying program that ended last week.
Goldman Sachs has lowered its forecasts for UK economic growth due to recent market volatility and changes in the government’s economic policy. The investment bank downgraded its prediction for the UK’s economic production in 2023 from a 0.4% decline to a 1% decline.
It’s a new dawn in the UK, and with it comes uncertainties. If the new finance minister manages to restore investor trust in the UK government, British pound futures prices might rebound. However, the UK’s economic outlook remains bleak and uncertain.