Kwarteng faces massive market turmoil after a disastrous day for sterling

Kwasi Kwarteng is struggling with massive market turmoil sparked by his tax-cut mini-budget, as a disastrous day for the pound saw Labor take its biggest poll lead over the Tories in more than 20 years.

The Treasury decided to settle markets with promises of a budget next spring as sterling fell to its lowest level against the dollar in at least half a century on Monday.

Senior Tory MP Huw Merriman – who backed former Chancellor Rishi Sunak as Conservative leader – warned Liz Truss she could lose voters “with policies we have warned against” as a new YouGov poll Labor 17 points brought in a lead, the party’s biggest lead since the company was founded in 2001.

Lenders withdrew some of their mortgages on Monday amid uncertainty following Mr Kwarteng’s £45billion tax cut package announced on Friday.

Meanwhile, the Bank of England said it would “not hesitate” to raise interest rates to support sterling’s value.

The pound fell more than 4% in early Asian trade to just $1.0327 before regaining some ground to around $1.07 on Monday night.

The Chancellor also said he would present the announcement of a “medium-term budget” to start deleveraging.

The Treasury Department said it will now be released on November 23, having previously been scheduled for the new year, and would provide further details on the government’s fiscal rules, including ensuring that debt as a percentage of GDP falls over the medium term.

At the same time, the Office for Fiscal Responsibility will release its updated forecasts for the current calendar, amid widespread criticism that there was no update when Mr Kwarteng unveiled his “growth plan” last week.

At one point it was thought the bank would be forced to intervene with an emergency rate hike amid fears that the pound could fall to par with the dollar.

But in the end, Governor Andrew Bailey said the monetary policy committee that sets interest rates would make a full assessment of the impact on inflation and sterling’s decline at its next scheduled meeting in November and then “act accordingly”.

Mr. Bailey welcomed the Chancellor’s commitment to “sustainable economic growth” and commitment to involve the OBR.

“The MPC will not hesitate to change interest rates as needed to bring inflation back to the 2 percent target in a sustainable manner over the medium term, in line with its mandate,” he said in a statement.

The move is seen as an attempt to calm markets, which were spooked by Mr. Kwarteng’s bigger-than-expected plans for tax cuts, which were funded by a massive expansion in government bonds.

Those concerns were only compounded by comments over the weekend from Mr Kwarteng, who suggested more tax cuts were on the way.

Some analysts warned the bank’s and Treasury Department’s statements were “too little, too late”.

Alastair George, Edison Group Chief Investment Strategist, said: “There is no rate hike today and speculators will relish the prospect of two months of inactivity from the Bank of England if the statement is taken at face value.

For Labour, Shadow Chancellor Rachel Reeves warned the Government cannot afford to wait until November to set out its plans and that the public needs confirmation now.

“It is unprecedented and a damning indictment that the Bank of England has had to step in to calm markets because of government irresponsibility,” she said.

At a fringe meeting at the Labor conference, she slammed the Chancellor for any delays: ‘Does he look at what’s happening in the financial markets? Did he notice the reaction to his tax return on Friday?

“That’s grossly irresponsible.”

Earlier, Downing Street had made it clear that the government would not let the market reaction deter it from its tax cut agenda.

The Prime Minister’s official spokesman said Britain had the second-lowest debt ratio in the G7 group of industrialized nations and the government’s plans were “fiscally sound”.

“As you know, the growth plan includes fundamental supply-side reforms to achieve higher and sustainable growth in the long-term and that is what we are focusing on,” the spokesman said.

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