Closing summary
Financial markets were sanguine about the delay to the government’s autumn statement from 31 October to 17 November, while the Liberal Democrats attacked the “damaging cloud of uncertainty” and analysts flagged concerns that the Bank of England will have to set interest rates before the anticipated spending cuts and tax rises.
At his first prime minister’s questions, Rishi Sunak refused to commit to raising benefits in line with inflation.
The pound hit a fresh six-week high of $1.1619 and traded 0.8% higher at $1.1553 on Wednesday afternoon. It was also given a leg up by a weaker dollar, amid expectations that the Federal Reserve may be less aggressive in hiking interest rates given the slowdown in the housing market, where mortgage rates hit a 21-year high.
UK borrowing costs have fallen sharply since Jeremy Hunt was appointed chancellor and reversed most of Liz Truss’s unfunded tax cuts. The yield, or interest rate, on 10-year government bonds fell just below 3.6% today, while the 20-year bond yield declined to 3.8% and the 30-year yield dropped to 3.6%. After the mini-budget on 23 September, the 10-year yield jumped to 4.5% while the 20- and 30-year yields surged beyond 5%.
Hargreaves Lansdown analyst Susannah Streeter said:
Sunak’s new cast for the cabinet, including the continuity chancellor Jeremy Hunt, was aimed at demonstrating to the markets that financial stability is top priority for the government and for now it doing the trick. His choice of words in his maiden speech were also reassuring, with a promise to set limits on borrowing.
Investors are mindful that it was the unnecessary rush to announce big tax cuts which caused such tumultuous times for the Truss administration and what they crave now is caution and stability. The premium slammed on UK assets by reckless policies of his predecessor appears to be slowly lifting, but hefty challenges for team Sunak remain, as the economy heads into recession and the productivity puzzle remains as cryptic as ever to solve.
Meanwhile, Viraj Patel, senior currency and macro global strategist at Vanda Research, tweeted:
This doesn’t change anything. Probably buys Sunak & Hunt time to get a proper plan together that restores fiscal credibility. But this makes the Bank of England’s job a lot harder next week. They may choose caution over aggression.
The Bank of England is due to announce its interest rate decision on 3 November and is expected to raise rates by 75bps to 3%.
Our main stories today:
Ministers are to re-examine the pensions triple lock and increasing benefits in line with inflation over the next fortnight, according to No 10, after Rishi Sunak delayed the announcement of the government’s fiscal plans from 31 October to 17 November.
The Bank of England will next week consider how much to raise interest rates without having received any guidance from the government about its tax and spending policies, after Jeremy Hunt pushed back the date for this year’s “autumn statement”.
Fracking will in effect remain banned under Rishi Sunak’s government, his spokesperson confirmed on Wednesday, saying the new prime minister was committed to the policy in the 2019 manifesto.
The confirmation came after the prime minister told the Commons that he “stands by” the manifesto, which put a moratorium on shale gas extraction.
Heathrow has said passengers may have to fly outside peak times on some days in the run-up to Christmas to avoid further travel chaos, as Europe’s busiest airport admitted it was still short of 25,000 staff to meet high demand.
Barclays has become the second big bank to breeze past profit forecasts this week after an increase in borrowing costs and bond trading during the UK’s market meltdown pushed earnings to £2bn this quarter.
A charity founded by the chancellor, Jeremy Hunt, paid more than £110,000 – two-thirds of its income – to his former political adviser Adam Smith, who lost his job over a lobbying scandal.
Patient Safety Watch, which was set up to research preventable harm in healthcare, paid Smith as its sole employee and chief executive about 66% of its income in the year ending January 2022.
Staff at a therapists’ trade union are threatening to strike over plans to make one in 10 of them redundant which have driven many to seek therapy themselves.
Workers at the Royal College of Occupational Therapists (RCOT) said they were given just three days to decide whether to accept redundancy or reapply for other jobs on worse terms in a process criticised as “fire and rehire”.
Nova Scotia touted its huge ‘green’ energy plant. Turns out it’s powered by coal
A peanut butter, dried thyme and garlic pasta dish is Nigella Lawson’s answer to money-saving as part of a suite of £1.25-a-portion recipes she has created under a partnership with online grocer Ocado.
Thank you for reading. We’ll be back tomorrow bright and early. Good-bye! -JK
Updated
Bank of Canada increases interest rates by 50bps, less than expected
The Bank of Canada has increased its policy interest rate by 50 basis points to 3.75%, less than the 75bp move expected by analysts.
It said in a statement:
Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the Governing Council expects that the policy interest rate will need to rise further. Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate.
Lisa Abramowicz of Bloomberg TV and radio tweeted:
The Bank of Canada reinforces the narrative that central banks will start tempering their rate hikes. Short-term yields around the world, including the U.S., take a sharp leg lower: https://t.co/Dpl6BDN6jG pic.twitter.com/FiBnluIK7U
— Lisa Abramowicz (@lisaabramowicz1) October 26, 2022
Updated
