Financial market worries over the UK budget appear to ease
Worries about this week’s tax-raising U.K. budget within financial markets appear to have eased with the interest rates charged on British debt steadying and the pound rising against most other currencies
LONDON — Worries about this week's tax-raising U.K. budget within financial markets appeared to ease Friday with the interest rates charged on British debt steadying and the pound rising against most other currencies.
In the wake of Wednesday's budget statement, the first by a Labour government for 14 years, British financial assets have been choppy, with investors taking a more risk-averse approach by selling both government bonds and the pound.
The budget saw taxes raised by 40 billion pounds ($52 billion), proportionately the biggest for over three decades, and borrowing and spending increased — a combination that clearly unnerved some investors.
Some analysts voiced worries about the potential inflationary impact of the budget, which may prompt the Bank of England to cut interest rates more slowly than previously anticipated. Though the bank is widely expected to reduce its main interest rate next week by a further quarter-point to 4.75%, the markets have moved to price in fewer reductions next year in the wake of the budget.
Other analysts said the public finances will likely need to be bolstered again in coming years if the U.K.'s economic growth doesn't pick up. The Office for Budget Responsibility, an independent watchdog, said in its assessment of the budget that the measures would do little to boost growth levels over the coming years.
On Friday, the yield, or interest rate, charged on the U.K.'s 10-year bonds held steady at 4.45%, following increases since Treasury chief Rachel Reeves presented the budget.
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