Economy  

Are we in a financial crisis yet?

Sonia Rach

Sonia Rach

Globally, there have been many challenges with Covid-19 and several lockdowns over the past few years.

The UK has been making its way back to a level of normality with the after effects of Brexit and the pandemic.

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Just as we thought we were getting somewhere, we were hit with the war, inflation higher than ever before, soaring energy prices, a new King, a new government, rising interest rates and to top it all off, tax cuts for the rich.

People in the UK are wondering how we are going to have these measures, so it comes as no surprise that globally people have lost faith in the UK too and are concerned. 

The IMF said that the UK should re-evaluate its tax cuts, saying they were likely to cause further inflation.

It said it was important that fiscal policy, through which the UK government is trying to encourage growth by way of tax cuts, does not work at “cross purposes” to monetary policy.

“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture.” 

The gilt market also began crashing, with the yield on the 10-year government bond surging above 4.5 per cent earlier this week.

The BoE also suspended its planned sale of gilts in response to turmoil in the bond markets in the wake of the new government's "mini" Budget.

Many are steering away from saying the sentence, as a means of not manifesting it into reality, but there is no hiding away from the fact that all of the above seems to point to the fact that we are officially in a financial crisis.

Sonia Rach is deputy news editor of FTAdviser