The Bank of England is taking emergency action to try to stabilize the pound

Bank of England

Markets were sent into freefall after the new government unveiled its economic strategy (Image: EPA/Getty)

The Bank of England was forced to intervene to prevent a “material risk to UK financial stability”.

It will be buying up massive amounts of government bonds to prop up prices after a stock market collapse in recent days.

The currency’s value plummeted after the new government announced its economic proposals on Friday that threatened to trigger a financial crisis.

Liz Truss and Kwasi Kwarteng have signed gratuitous plans to borrow billions of pounds to fund a range of tax cuts, including for the wealthiest in society.

They argue it will boost growth, but with inflation rates and the gloomy global economy, investors fear the government has written a check it can’t cash.

Sterling’s value against the dollar hit an all-time low on Monday and falling confidence in the UK economy means the price the government has to pay to borrow money to pay for its policies has skyrocketed .

In a highly unusual move, the International Monetary Fund directly criticized the government’s plan, urging it to “reassess”, going so far as to say it risks fueling inequality.

Now the bank’s governor has announced an unprecedented emergency intervention to halt further deterioration by buying government debt.

A statement said: “Should the dysfunction in this market persist or worsen, there would be a significant risk to UK financial stability.

“This would lead to an unwarranted tightening of financing conditions and a reduction in the flow of credit to the real economy.

“In line with its objective of financial stability, the Bank of England stands ready to restore the functioning of the market and reduce any risks of contagion to credit conditions for UK households and businesses.”

A spokesman for the Treasury Department confirmed “significantly”. [market] volatility in recent days and said the bank was acting to “restore orderly market conditions”.

A statement continued: “These purchases will be strictly time-limited and will be completed over the next two weeks.

“To enable the Bank to carry out this financial stability intervention, this operation has been fully compensated by HM Treasury.”

The Treasury also strove to reassure markets that Mr Kwarteng was “committed to the Bank of England’s independence” after it was revealed he was meeting with its governor every day, an unusual arrangement for a chancellor and central bank governor.

This is breaking news, more coming soon… Check back soon for more updates.

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https://metro.co.uk/2022/09/28/bank-of-england-takes-emergency-measures-to-try-and-stabilise-the-pound-17465471/ The Bank of England is taking emergency action to try to stabilize the pound

Justin Scacco

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