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Finanze® Daily Digest - 08/09/2022

Writer's picture: Edgar RayoEdgar Rayo

Updated: Sep 29, 2022



The Brief: A conflict between the Bank of England (BOE) and Liz Truss is brewing following the newly elected prime minister’s announcement to pursue her plans of freezing power hike costs. The move is intended to tame inflation, which is currently at a 40-year high of 10.1%. However, a consensus among analysts shows that the BOE will be likely making a series of interest rate hikes before it concludes its remaining policy meetings this year. Kwasi Kwarteng, the UK finance minister, will be meeting weekly with BOE Governor Andrew Bailey to discuss solutions on managing the impact of inflation. 

 

Why It Matters: During the campaign trail, Truss’ energy cap proposal was one of the major points that defined her economic reform plans. While professing her support towards the BOE’s independence, however, she previously called for a review of the bank’s mandate to follow suit of what other central banks are doing. This would raise concerns among investors who advocate for the BOE’s autonomy on ensuring that its monetary policy will pull down inflation. 


Finanze® Foresights: While we’re waiting for Truss’ details of her energy freeze bill today, the impact of her decisions is already being felt as the sterling fell to its lowest level against the US dollar on Wednesday at £0.8701 (-0.4%), its lowest in 37 years. It’s most likely that in the coming months, she and Kwarteng will be endorsing a change of the inflation target to mitigate the ongoing crisis – a move that will challenge the independence of the BOE. This will further add to the gloomy response among investors to the country’s economic future. 


--- To the fullest extent permitted by law, Finanze Ltd are not responsible for any errors or omissions in any statements, views, opinions, facts, figures, commentary or any other material in the articles contained herein, or for loss arising from its use or performance, or for the results of any actions or lack of action taken on the basis of information provided in articles.

The topics covered in articles are complex and do not substitute the need for financial, legal, accounting, tax and other advice before making any decisions or taking any action based on information in articles.

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