The U.K. in search of stability Facts: 1) Jeremy Hunt became | The Econgram

The U.K. in search of stability

Facts:
1) Jeremy Hunt became the new U.K. Treasury (economic and finance ministry) Chief after Kwasi Kwarteng, his predecessor, was fired.
2) Kwarteng previously announced tax cuts of 45£ billion and an energy price cap, protecting households and businesses from volatile energy prices.
3) Hunt cancelled the tax cuts and pared back the energy price cap.

Analysis:
1) Kwarteng was targeting economic growth by increasing the government debt.
2) The market reacted with a fire sale of the government bonds, leading to a fall in their prices, and causing an increase in the interest rate. This raised the cost of debt. Bank of England was forced to intervene immediately, stabilizing the situation.
3) The fire sale happened due to uncertainty in the stability of the U.K. government's position because of the rise of the debt in times of soaring inflation.
4) Hunt, oppositely to his predecessor, targets stability and thinks it is irresponsible to increase the debt and expose public finance to the volatility in gas prices. Also, he believes that it is crucial to leave the opportunity to BOE to raise interest rates in times of inflation. He aims to do it by reducing government debt.

Inspired by WSJ