Closing summary
That’s all for today, after a busy, and worrysome session.
The IMF has suggested the government should change course over the mini-budget, the IFS warned of a £62bn black hole in the UK public finances finances, and the Bank of England was forced to broaden its attempts to keep order in the markets.
Consumers have been hit by rising grocery costs, leading some families to buy cheaper products such as own-brand goods and ‘wonky’ fruit and veg, while petrol prices are on the rise again.
A sharp rise in the number of people unable to work due to illness has pulled the unemployment rate down.
Stock markets had a bad day as the IMF cut its growth forecasts.
And long-dated UK bond yields have risen again – the 30-year gilt is yielding almost 4.8% tonight, the highest since the Bank of England began its attempts to cool the panic.
Here’s today’s main stories:
Updated
The crisis in the pensions sector over the use of liability-driven investing (LDI) schemes to hedge risks shows how the City never seems equipped to handle the next big financial hazard, my colleague Phillip Inman writes.
He points out that former Bank of England chief economist Andy Haldane warned in 2014 that financial activity will migrate outside the banking system, creating new risks which are now playing out.
And the Bank’s efforts to stem the panic is also causing confusion, he adds:
Most analysts have accused Kwasi Kwarteng of triggering the chaos with his mini-budget. But investors have also been spooked by the Bank of England’s attempts to go back to a more normal world – one where it stops printing money through quantitative easing, a mainstay of economic policy since the financial crisis, and prepares to sell back to investors all that government debt it has bought.
The markets are spooked because the Bank has delayed the start of a programme to sell £100bn of government bonds, but not withdrawn it. Winding back quantitative easing would mean the Bank is both buying government bonds – to help pension funds – and selling them.
Until Threadneedle Street ends this obvious contradiction, another embarrassing episode is set to be added to British financial history. Until the regulators seek out risk wherever they find it, these financial blow-ups are going to continue.
