Kwasi Kwarteng asks MPs to “keep cool heads” as the pound tumbles

Tories today condemned the IMF as sterling continued to fall and Kwasi Kwarteng made a new bid to calm panicked markets.

The Chancellor later meets with investment banks after his tax cut budget spooked traders – driving government borrowing costs to staggering levels and pounding sterling.

The currency had regained some ground after hitting an all-time low of just $1.03 on Monday but fell again this morning after the IMF criticized the “large and untargeted” fiscal package.

There was fury at the international panel, which asked Mr Kwarteng to reverse his tax cuts in his next mini-budget on November 23.

Speaking to dozens of MPs last night, Mr Kwarteng tried to calm nerves on the Conservative benches, stressing the need for “cool heads” and saying the government “can pull this through”.

Meanwhile, some senior Tories have argued that the pound’s slide was actually driven by fears that Labor will soon be in power.

With Keir Starmer up to 17 points clear in polls, former MEP Lord Hannan wrote on the ConservativeHome website: “What we have seen since Friday is in part a market adjustment to the increased likelihood of Sir Keir Starmer winning in 2024 or 2025 – resulting in higher taxes, higher spending and a weaker economy.’

Kwasi Kwarteng later meets with investment banks after his tax cut budget scared traders

The currency had regained some ground after hitting an all-time low of just $1.03 on Monday but fell again this morning after the IMF criticized the “large and untargeted” fiscal package

Sterling slipped back to $1.06 this morning after recovering to $1.08 yesterday.

There are growing fears that the currency will match the greenback unless the UK government can stem the slide.

The dollar has been extremely strong globally, but the pound has struggled even against this backdrop.

After a day in which markets had calmed down and some government bonds had rallied, the Treasury Department’s IMF intervention was met with outrage.

Tory veteran John Redwood said: “The IMF was wrong, as was the Bank of England, on inflation, which they are now right to worry about. They didn’t warn us or the other central banks in the run-up to the great inflation that monetary policy of 2021 was way too loose, interest rates way too low and money printing was getting out of control. It is a great pity that they did not warn about this.

“Now they should be happy. We should fight the recession. Of course we have to be careful with finances. But the truth is that if austerity goes its way and we have a big recession, borrowing will not go down, but borrowing will go up.’

Sir John offered a robust defense of Ms Truss’ tax cut plan while delivering a sharp message to the Bank of England against further interest rate intervention: “My message today is that the Government is right to see the biggest threat for the year ahead lies a recession, not inflation, because the good news is that all forecasters say inflation will fall sharply next year, and the sooner the better.’

Former Cabinet Secretary Lord Frost, a close ally of Liz Truss, said the body has always backed “conventional” measures that failed to boost growth.

He told the Telegraph that the prime minister and chancellor should simply “blank out” the criticism.

A Tory MP said: “At the end of the day it is up to the elected government to set the fiscal strategy. I am confident that the ministers will ensure a growing economy.”

Responding to the criticism, a Finance Ministry spokeswoman said: “We acted quickly to protect homes and businesses this winter and next, following the unprecedented surge in energy prices caused by (Vladimir) Putin’s illegal actions in Ukraine.” .”

The government was “focused on growing the economy to raise living standards for all,” and the Chancellor’s November 23 statement “will provide more detail on the government’s fiscal rules, including ensuring that debt is accounted for as a proportion of the economy.” GDP will fall in the medium term”. .

Mr Kwarteng told investors in the city yesterday he was “confident” that the biggest tax cuts in 50 years will succeed at £45bn.

He is expected to stress to investment bankers today that ministers are seeking reforms to boost growth, including ‘Big Bang 2.0’ measures to cut red tape for the city.

The International Monetary Fund was told last night to stay out of British affairs after launching a scathing attack on the government’s tax-cut mini-budget

Meanwhile, concerns over a mortgage crisis are growing as the Bank of England prepares to hike interest rates.

Lenders have pulled dozens of products as they struggle to adjust to expectations of higher costs.

Investors have been betting on a rate hike of up to 1.5 percentage points at or before the next Bank of England Monetary Policy Committee meeting in early November.

The bank’s chief economist Huw Pill warned Threadneedle Street that developments over the past few days “could not be indifferent” as borrowing costs need to rise to protect the pound and keep inflation in check.

“It’s hard not to conclude that all of this will require significant monetary policy action,” Mr Pill said.