Thursday, December 01, 2022

The UK keeps its Titanic with the truss

economy of United Kingdom, led by Liz Truss, deteriorates faster than anticipated and points to a longer-than-expected recession. The new government’s measures do not help attract investment as they follow the path of a controversial tax reform, which involves the purchase and issuance of more debt with the backing of the Bank of England. The maneuver has been described as a big mistake and the note of the country’s sovereign bonds is in question.

Moody’s, IMF and his own party’s allegations against ‘truss economics’

The truce has led to a strong tax cut that would benefit the highest incomes, a measure that would exacerbate inequality, according to the IMF, and that could be negative for credit, according to the agency. Moody’s, Criticism of the truss has focused on the lack of clear objectives in fiscal policy, given the high inflationary pressures caused by high energy prices. because of this reason, The IMF does not recommend such a cut because monetary policy It goes in the opposite direction, especially as the Bank of England has gone on to raise interest rates to try to stem the rise in consumer prices.

Truss won’t give back despite pounds sinking

But the truss was not taken lightly and stands by its decision. ,Good“, he said of the new tax reform that will ease the pockets of consumers and companies, at least indebted. And that, at the same time, the Bank of England will continue to tighten monetary policy, Despite the pound sinking to a historic low against the dollar I am getting stronger.

The currency pair is very close to parity, a level that has never been seen before, but could soon be seen if the stimulus continues. This fact directly affects the importing companies, which will have less purchasing power, as well as the households. Criticism of Truss also comes from his own party, where it is ensured that «this madness must end,

The Prime Minister Of The United Kingdom, Liz Truse, Maintains Her Financial Plan.
The Prime Minister of the United Kingdom, Liz Truse, maintains her financial plan.

And that is, British government leaders insist on covering the tax cuts with a bigger debt issue. A measure that could further worsen the finances of the executive. As an example of this, the cover of economist This week is more than striking. A boat adrift, a . with truss Up front, aiming nowhere and making water.

Nomura forecasts new record low for pound with truce measures

Pound and Dollar Pair «will address» in the region of 0.9 at the end of the year, as assured by Nomura in an analysis of INVERSIÓN’s reach. They also see “risks” on the way due to changes in the dollar due to “collapse of the trade balance in Europe” and increased oil and liquefied gas exports from the United States.

Similarly, Nomura indicated that a slowdown in the old continent would be a fact due to lower global growth expectations and a contraction of credit. In this sense, he believes that the market has not yet seen the worst of this stress and compares the situation to the energy crisis of the 1970s.

The analysis signature is shown in the same line berenburg While analyzing the situation in a country ruled by a truce. In his opinion, the current macroeconomic environment is «challenging» And given the growth of the English real estate market, has deteriorated faster than anticipated. points all the way to a “recession“, have been conducted.

In this sense, housing prices have declined by 24% since the beginning of the year, with an accumulated decline of 40% over the past twelve months. In fact, affection does not see «positive trigger» To give some better visibility and see the light at the end of the tunnel. However, it finds that some valuations are at attractive levels, albeit with the risks described in the short term.

Housing in the United Kingdom, in the fall

The German analysis house recalls that this is not the time to enter a bear market – it is not the time to take a stab at a fall – especially when interest rates in the United Kingdom are at 4.52%, while its spread exceeds that of generic BBB bonds for 10 years. Bonds have increased. and that is, the measures of Truss will sustain inflation for longerComparing the situation with the crises of 2000 and 2008, relying on the fall of the pound against the dollar.

In this sense, he sees “warning signs” as “the downside risks remain significant.” In this sense, it turns out that companies sell assets while minimizing risk in the real estate market, due to the fact that a sharp drop in valuation is expected. Truss, for now, moves away from populism and avoid freezing rent, as urged by the Mayor of London. For the analysis agency, the position of the new Prime Minister of the United Kingdom is “correct”.

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