UK was ‘hours away’ from potential total collapse – Bank of England – RT Business News
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The fallout from Truss’ « mini budget » was « a very real threat to financial stability », Andrew Bailey told Channel 4.
Britain narrowly avoided a financial crisis in September that could have seen some pension funds collapse entirely, Bank of England Governor Andrew Bailey told Channel 4 on Thursday.
When asked how close the UK was to potential total economic collapse after Liz Truss’ mini budget announcement, Bailey said: « I think at the time we stepped in, I can tell you the messages we were getting from the markets were that it was hours. »
The so-called Truss « mini-budget » included the largest tax cuts since 1972, funded by a huge increase in borrowing, with no explanation of how the government would repay them. These measures have caused the pound to fall to a historic low against the dollar and caused the price of British government bonds – known as gilts – to collapse.
The Bank of England intervened by announcing an extension of its emergency bond purchases to « Restore orderly market conditions. »
« It was becoming unstable and it was affecting pension funds, for example, and their operation. So we had to intervene quickly and we had to intervene quite decisively. It felt and was a very real threat to financial stability,” Bailey said.
His interview came just hours after the regulator raised the interest rate from 2.25% to 3% in an attempt to curb soaring inflation.
Bailey also warned Britain was facing its longest recession since records began and warned of a « hard way to go » for the UK and its households.
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