London Daily

Focus on the big picture.
Friday, May 09, 2025

Bank of England governor warns of Truss hangover effect

Bank of England governor warns of Truss hangover effect

There is still a "hangover effect" from the financial instability seen during the prime ministership of Liz Truss, the Bank of England governor has said.

Andrew Bailey told MPs that the cost of government borrowing, which soared after the mini-budget, had normalised.

But he said international investors were still wary about lending money to the UK government.

"It's going to take some time to convince everybody that we're back to where we were before," Mr Bailey said.
"Not because I doubt the

current government, I am not trying in any sense to be negative. Obviously there is something of a hangover effect."

In September the pound fell sharply and government borrowing costs soared after Ms Truss's administration promised a huge package of tax cuts without explaining how they would be funded.

It caused mortgage rates to surge to a 14-year high. The Bank of England also had to step in to calm financial markets after the chaos put some pension funds at risk.

Since then, Chancellor Jeremy Hunt has reversed almost all of Ms Truss's tax plans and the pound and government borrowing costs have stabilised.

Mr Bailey told MPs on the Treasury Select Committee that international investors were no longer demanding sharply higher rates of interest when they bought UK "gilts", which are debt issued by the UK government.

"My judgement would be that that has pretty much gone now actually and we're back to where we were before," he said.

But he said there were signs the instability had left international investors wary of buying UK gilts.

The Bank of England says foreign investors sold more UK bonds than they bought between September and November, indicating a lack of confidence in the government. However, Mr Bailey said that the gap was "considerably lower" in November suggesting confidence was returning.

"So I think that is reasonable evidence and it probably suggests that [the hit to the UK's reputation] is taking a bit longer to work its way through," he told MPs.


Falling inflation


Separately, Mr Bailey said that inflation - the rate at which prices rise - looks set to fall sharply this year as energy prices decrease, but a shortage of workers in the labour market posed a "major risk" to this outcome.

"I think that going forwards the major risk to inflation coming down ... is the shrinkage of labour force," he told MPs.

The cost of living is rising at its fastest pace in 40 years as energy bills and food price soar, putting households under pressure.

The Bank of England is expected to raise interest rates for a tenth time in a row early next month as it seeks to cool inflation.

But it has to balance rates rises - which increase the cost of borrowing money for consumers and businesses - with the risk of tipping the country into recession.

A recent forecast from the Office for Budget Responsibility suggests the UK is already in recession and will remain so for the whole of 2023.

Newsletter

Related Articles

0:00
0:00
Close
Historic Papal Conclave Set to Commence in Rome
Huge Copper, Gold, and Silver Discovery in Argentina and Chile — But the Profits Go Abroad
Prince Harry is pleading for reconciliation — but the royals are just as sick of his victimhood as everyone else
The Road to Freedom: She Protested Putin, Escaped House Arrest, and Survived a 2,800-Kilometer Journey
OpenAI's Flip-Flop: No Longer Going Commercial, Back to Nonprofit, After Musk Lawsuit and Backlash
“Trump Supporter” Aims to Bring a MAGA-Style Shift to Romania
First From China: Zhao Xintong Wins the Snooker World Championship
Nvidia Faces Billion-Dollar Losses – Warns: China Is on Its Way to Becoming an AI Superpower
Trump Rules Out Third Term, Names JD Vance and Marco Rubio as Potential Successors
Mexico Says ‘No’ to U.S. Troops: President Sheinbaum Rejects Trump’s Offer to Fight Cartels
Nigel Farage’s Reform UK Storms the Map, Wrecking the Two-Party Monopoly
DOGE: Reimagining Government Operations with AI
Common Sense Returns to Britain's Legal System: UK Supreme Court Declares a Woman Is… a Woman
Beijing Says U.S. Is ‘Reaching Out’ for Tariff Talks Amid Soaring Trade Tensions
U.K. Court Rejects Prince Harry’s Final Appeal Over Police Security
Prince Harry’s Heartfelt Outburst Rocks the Royal Family
Trump Shares AI-Generated Image of Himself as… Pope, Prompting Outrage Reaction
Transgender Swimmer Secures Five Gold Medals at U.S. Masters Championship
Prince Harry: “I Want Reconciliation with My Family”
Germany's Alternative für Deutschland (AfD) party has now been officially labeled “right-wing extremist” by the federal office for the so-called “protection of the constitution.”
Amazon Launches Satellite Internet Service Amidst Competition with SpaceX
Transformative Changes in Women's Wrestling: The Rise of WWE Superstars
The Rush to the White Gold: Global Investment Surge in Natural Hydrogen Exploration
This is a day in Spain without electricity and internet
Reform UK Surprises in British Elections, Challenging Traditional Two-Party System
180-Year-Old Christian University in South Carolina Announces Closure Due to Unmet $6 Million Fundraising Goal
Brazilian Woman Jailed for Fourteen Years for Writing “You Lost, Idiot” on Statue During Protest
Trump Administration Removes National Security Adviser Mike Waltz Amid Signal Chat Controversy
Dutch Politician Eva Vlaardingerbroek Receives Spyware Threat Alert from Apple
Paramount Board Considers Settlement in Trump’s $20 Billion Lawsuit Over "60 Minutes" Interview
U.S. Economy Shrink in Trump’s First Quarter as Tariff Policy Raises Questions
Deadline Looms for RTS Meter Replacement: Hundreds of Thousands at Risk of Heating Disruption
Sweden Grapples with Deadly Gun Violence: Suspect Arrested After Three Young Men Killed in Uppsala Hair Salon
Walz Reveals Why Harris Chose Him as Her Running Mate and Reflects on Democratic Losses
Spain Restores Power After Unprecedented Nationwide Blackout
Carney Secures Liberal Mandate in Canada’s Federal Election
Death Penalty Sought as Luigi Manion Pleads Not Guilty in CEO Murder Case
President Trump contacts Jeff Bezos after reports of Amazon considering listing tariff surcharges; company clarifies no such plan for main platform
Spain and Portugal Recover from Massive Blackout
Liverpool Clinches Record-Equalling 20th English League Title Under Arne Slot
Singapore Politicians Warn Against Foreign Interference in Election
Driver Ploughs into Vancouver Festival Crowd, Killing Nine
Depression, Fear of Defamation, and a Tragic End: New Details on Virginia Giuffre’s Suicide
“Sharia for UK, Allah Akbar!”
Massive Explosion at Iran's Bandar Abbas Port Linked to Suspicious Chemical Shipments
Incident Reflection: A Harsh Reality Check
Pakistani migrants to Danish man: “ “We have 5 children while you have 1 or 2. In 10 years, there will be more Pakistanis than Danes here.“
Clashes Erupt in London as Tensions Rise Between Indian and Pakistani Communities
Specialized anti-drone weapons deployed among security personnel Ahead of Papal Funeral
How do you fix this culture?
×