The Bank of England is responding to soaring UK bond yields since the government unveiled debt-fuelled tax cuts. The week had already seen action taken by the BoE and UK government aimed at bringing calm to bond markets in particular as state borrowing soars. "Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability," it added. "With a weaker economy, getting government finances on a sustainable path without cancelling tax cuts could force... big and painful spending cuts," the Institute for Fiscal Studies said in a study. Reducing debt "through spending cuts alone, without actually specifying which budgets would be cut, risks stretching credulity to breaking point", it added.

Source: Daily Nation October 11, 2022 08:11 UTC