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Another Bank of England official has weighed in to criticise the government’s mini-budget announcement – rebuking the absence of Office of Budget Responsibility (OBR) input, detailing how the UK bond market reaction was unique, and reiterating the Bank’s resolve to return inflation to 2%.
Jonathan Haskel, a member of the Bank of England‘s interest rate-setting Monetary Policy Committee (MPC), has reiterated and added to criticism from the Bank directed at the government.
The absence of OBR involvement in the mini-budget on 23 September came under fire for creating uncertainty.
“A sidelined OBR generates more uncertainty by worsening everyone’s information base,” Mr Haskel said, adding that the Bank makes use of OBR data when preparing its forecasts.
The Bank’s unprecedented intervention into the UK government bond market in the wake of the mini-budget, to prevent mass default in pension funds, was done to prevent spillover into households and businesses.
“The Bank of England, rightly intervened, in a way that is targeted and temporary, to restore gilt market functioning. Restoring market functioning prevents costly self-fulfilling market dislocation that might spread from financial markets into credit conditions for UK households and businesses,” Mr Haskel said.
While the government has maintained the market reaction was due to external, global factors, the Bank once again stated the UK was an outlier.
“In the days following HM Treasury’s fiscal event on Friday 23 September, there was a significant divergence between government bond yields in the UK and in other countries”, Mr Haskel said.
“Between close of business on Thursday 22 September (the day before the fiscal event) and close of business on Tuesday 27 September (the day before the Bank’s market intervention), US and German 30-year government bond yields increased by around 20 basis points. By contrast, UK 30-year gilts rose by 120 basis points.”
As part of the gilt (UK government…
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Source : skynews
