Liz Truss’s plan for BOE seen as threat to pound and UK bonds11 Aug 2022 10:31
Truss has said that these are ‘unprecedented economic times’ and the ‘business as usual economic strategy’ isn’t working.
Liz Truss’s thoughts about how to manage the Bank of England are adding to a mounting list of threats to the value of the pound and UK government bonds.
The foreign secretary, who is leading in the race to replace Boris Johnson as prime minister, has stepped up calls for a review the central bank’s remit and potentially a new money supply target. While the remarks have been vague, analysts and investors are giving more thought to a risk that’s not yet priced into the market.
The worry is that Truss, if she takes office in September, may upend three-decade-long focus on fighting inflation and tell policy makers to use tools that were discredited in the 1980s. That’s adding to caution about the outlook for sterling and gilts, with the pound already suffering from questions about the health of the economy and the public finances.
“You’d see a sell off in gilts and a sell off in sterling too” if there was a change to the mandate, said Gordon Shannon, portfolio manager at TwentyFour Asset Management. “We aren’t taking it terribly seriously, but markets can be complacent about these things.”
Truss and her allies in the contest to lead the ruling Conservative Party have made the BOE a political punching bag, dragging Governor Andrew Bailey’s handling of the aftermath of the pandemic into the limelight.
https://www.moneyweb.co.za/news/international/liz-trusss-plan-for-boe-seen-as-threat-to-pound-and-uk-bonds/
Sign In
Follow the stocks
