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businessClosed Sep 23, 2022

Truss’s Economic Plan Sends UK Markets Into Meltdown

  • Gilt yields set for biggest gain, pound falls after mini-budget
  • Traders price in full point BOE rate increase in November
  • UK to scrap 45% additional rate of income tax
  • Energy bill bailout will cost £60 billion over six months
  • Kwarteng scraps cap on bonuses, cuts stamp duty on home purchases
Here are the key takeaways from UK Chancellor Kwasi Kwarteng’s mini-budget.

  • The fiscal statement represented a sweeping rewrite of fiscal policy, slashing taxes and removing regulation with barely a nod to raising revenue
  • The plans represent a major gamble to bring about the government’s aim to boost trend growth to 2.5%, and raise Truss’s chances of re-election
  • The statement sparked a major market meltdown as traders were spooked by the extra borrowing likely needed to fund the measures
  • That saw the pound drop to the lowest since 1985, and pushed up the yield on five-year gilts by the most on record
  • Investors also worry the cuts could fuel already sky-high inflation, and moved to price in a 100 basis-point rate hike from the Bank of England in November