Liz Truss’ tax gamble sends British pound plummeting to new low
Ms. Truss won the race to succeed Boris Johnson as leader of the Conservative Party, and prime minister, on Sept. 5. She ran on a free-enterprise platform that focused on lowering taxes and reducing the role of government. After a 10-day pause because of the death of the Queen on Sept. 8, Ms. Truss and Kwasi Kwarteng, the new Chancellor of the Exchequer, have come out swinging.
The scale of Friday’s announcement and the level of borrowing have roiled financial markets. On Friday the pound sank 3 per cent in value against the U.S. dollar, the biggest single-day drop in two years. The dilemma for Ms. Truss is that while she is eager to boost economic growth, the Bank of England is trying to put the brakes on inflation by cooling the economy.
In a statement late Monday, the Treasury Department sought to reassure investors by saying that Mr. Kwarteng would provide details on Nov. 23 about how the government intends to finance its policies. Many investors were calling on the central bank to intervene with an emergency rate hike on Monday to help boost the value of the pound. That didn’t happen and instead the bank said that it would address the situation at its next scheduled meeting in November. It also added that it would “not hesitate to change interest rates by as much as needed” to control inflation.
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