Short-term success will not cancel out the medium and long-term challenges that remain for the government, say experts as new chancellor Jeremy Hunt tries to shore up the UK economy.
Fall in gilt yields a reprieve, but inflation and recession still loom.
£2.4 trillion national debt and weak pound pose significant longer-term difficulties for the UK as a whole
Russ Mould, investment director at AJ Bell, comments on the near-term, medium-term and long-term challenges that still face the UK government: “New chancellor Jeremy Hunt will be pleased to see the FTSE 100 rising, the pound gaining against the dollar and the euro, and gilt yields falling in response to his new policy salvo. Achieving some degree of near-term calm is a good thing, but neither Mr Hunt nor prime minister Liz Truss can rest on their laurels. The medium-term challenge of navigating a path between recession and inflation remains and then come the long-term tasks of picking sterling off the floor and managing the nation’s £2.4 trillion national debt.”
Near-term: firm numbers may bring some calm
“A drop in the benchmark ten-year gilt, or government bond, yield will be welcomed with a sigh of relief in Downing Street, the City and the households of the UK, as this could bring some relief to stressed financial markets, pension fund managers and those who are worrying about the mortgage bills. The yield on 2-year and 30-year government debt is also falling today.
“However, the yield on all three is still above where it was before former chancellor Kwasi Kwarteng launched his fiscal event on 23 September, so markets will still be looking for some clear, well-costed tax and spending plans, as well as the Office for Budget Responsibility’s independent verdict on 31 October.”