The U-Turn – U.K. Reverses Tax Plans
Without a U.S. Federal Reserve meeting in October, some of the biggest economic news came overseas yesterday alongside statements by the new U.K. Treasury Chief Jeremy Hunt. Hunt, who very recently took over after the termination of Kwasi Kwarteng, claimed the United Kingdom will commence its plan to completely pivot from its previous package of measures. This U-turn will consist of reversing the previously announced tax cuts as well as reducing the current energy price-cap subsidy to ensure national financial stability. The move, along with earnings calls, sent broad stock markets to rally to correct losses from the previous week.
The news, however, draws worry about the future of U.K. Prime Minister Liz Truss after her signature economic policy to improve financial conditions failed. The tax cuts and large energy subsidies were presumed to help the populace from rising energy bills, but the move led to an urgent sell-off in British markets amid fears that the package would worsen inflation. Nevertheless, the statements by Hunt today caused the pound to surge 1.86%, the 10-year government yield to decrease 0.415 percentage points, and an evident increase in investor bullishness.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.