Pour Andy Bruce
LondonSeptember 27 – Investor confidence in the UK, which is at its lowest level, will recover only with a 180-degree turn in the economic plan announced by the British Chancellor of the Exchequer, Quasi Quarteng, last week, according to US economist Larry Summers. J. P. Morgan.
The pound hit a record low of $1.0327 on Monday, as British government bonds sold at a brutal pace, while some mortgage providers, unable to price loans, suspended sales to new customers.
“The first step to gaining credibility is not saying unbelievable things,” Summers said on Twitter on Tuesday.
Summers pointed to rising interest rates on long-term British debt as “a hallmark of situations where credibility has been lost.”
“It happens more often in developing countries, but it happened before his 180-degree turn with (former French President François) Mitterrandal at the beginning of his term, (former US President Jimmy) during the last part of the Carter administration. Federal Reserve Chairman Paul) Volcker and in Germany (Former German Finance Minister Oscar) Lafontaine.
On Monday, the Bank of England and the UK Treasury made statements hoping to reassure investors, with the central bank saying it would not hesitate to raise interest rates if necessary.
Quarteng also said he would present a plan to cut medium-term debt on 23 November, along with forecasts from Britain’s Independent Office for Budget Responsibility, showing the full extent of government borrowing.
Alan Monks, an economist at the largest US bank JP Morgan, said the intervention is “restrained”.
“But there are still no clear indications that the origin of the problem”
government fiscal strategy being reversed or reconsidered,” said the monks.
“It would have to be before November to avoid a very bad outcome for the economy.”
The pound was trading at $1.0797 at 7:33 am (0633 .) GMT,