Boe's Pill: UK Fiscal Policy Must Not Threaten Credibility

• Britain's government must ensure that its tax cuts and higher spending do not threaten the public finances over the long term or the effectiveness of the Bank of England, the central bank's chief economist, Huw Pill, said on Wednesday.
• The BoE was forced to intervene in Britain's government bond market on Sept. 28 after prices slumped, threatening a fire sale of assets by pension funds which had been caught out by the speed of the move.
• While bond yields have risen globally all year, the sharp slump came immediately after finance minister Kwasi Kwarteng's first fiscal statement, which lacked the usual independent forecasts and included 45 billion pounds ($49.7 billion) of unfunded tax cuts.
• Pill said that while the energy support package - which will cost 60 billion pounds over the next six months - did reduce some short-term inflation risks and economic dangers, it also added to inflation pressure in the medium term and put pressure on the public finances.

(Source: Reuters)