Kwasi Kwarteng is launching a fresh bid to reassure panicky markets today as the Pound dipped further in the wake of an extraordinary intervention by the IMF.
The Chancellor is meeting investment banks later after his tax-cutting Budget spooked traders – driving up government borrowing costs to eye-watering levels and hammering Sterling.
The currency had clawed back ground after reaching an all-time low of just $1.03 on Monday, but fell again this morning after the IMF criticised the ‘large and untargeted’ fiscal package.
But Tories reacted with fury to after the international body urged Mr Kwarteng to perform a U-turn on his tax cuts in his next mini-Budget on November 23.
Mr Kwarteng tried to soothe nerves on the Conservative benches in a call with dozens of MPs last night, stressing the need for ‘cool heads’ and saying the government ‘can see this through’.
Kwasi Kwarteng is meeting investment banks later after his tax-cutting Budget spooked traders
The currency had clawed back ground after reaching an all-time low of just $1.03 on Monday, but fell again this morning after the IMF criticised the ‘large and untargeted’ fiscal package
Sterling fell back to $1.06 this morning after recovering to $1.08 yesterday.
Fears are growing that the currency will be at parity with the greenback unless the UK Government can arrest the slide.
The dollar has been extremely strong worldwide, but the Pound has struggled even against that backdrop.
The IMF’s intervention was met with fury inside the Treasury, after a day when markets had calmed and some government bonds had rallied.
Former Cabinet minister Lord Frost, a close ally of Liz Truss, said the body had always supported ‘conventional’ policies that had failed to boost growth.
He told the Telegraph that the PM and Chancellor should merely ‘tune out’ the criticism.
One Tory MP said: ‘At the end of the day it’s up to the elected Government to set fiscal strategy. I’m confident ministers will deliver a growing economy.’
In response to the criticism a Treasury spokeswoman said: ‘We have acted at speed to protect households and businesses through this winter and the next, following the unprecedented energy price rise caused by (Vladimir) Putin’s illegal actions in Ukraine.’
The Government was ‘focused on growing the economy to raise living standards for everyone’ and the Chancellor’s statement on November 23 ‘will set out further details on the Government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium term’.
Mr Kwarteng told City investors yesterday he was ‘confident’ the biggest tax cuts in 50 years, at £45billion, will succeed.
He is expected to emphasise to investment bankers today that ministers are pursuing reform to enhance growth, including a ‘Big Bang 2.0’ measures to reduce red tape for the City.
The International Monetary Fund was told to keep its nose out of British affairs last night after it launched a withering attack on the Government’s tax-cutting mini-Budget
Meanwhile, there are mounting concerns about a mortgage crisis as the Bank of England prepares to hike interest rates.
Lenders have withdrawn dozens of products as they struggle to adjust to the expectations of higher costs.
Investors have been betting on an increase of up to 1.5 percentage points in interest rates on, or before, the next meeting of the Bank of England’s Monetary Policy Committee in early November.
The Bank’s chief economist Huw Pill warned Threadneedle Street ‘cannot be indifferent’ to the developments of the past days, seen as a signal the cost of borrowing will have to go up to protect the pound and keep a lid on inflation.
‘It is hard not to draw the conclusion that all this will require significant monetary policy response,’ Mr Pill said.