London Daily

Focus on the big picture.
Monday, Sep 01, 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
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
Federal Reserve Independence Questioned Amid Trump’s Push to Reshape Central Bank
British Politics Faces Tumultuous Autumn After Summer of Rebellions and Rising Farage Momentum
US Appeals Court Rules Against Most Trump-Era Tariffs
UK Sought Broad Access to Apple Users’ Data, Court Filing Reveals
UK Bank Shares Dive Over Potential Tax on Sector
Germany’s Auto Industry Sheds 51,500 Jobs in First Half of 2025 Amid Deepening Crisis
Bruce Willis Relocated Due to Advanced Dementia
French and Korean Nuclear Majors Clash As EU Launches Foreign Subsidy Probe
EU Stands Firm on Digital Rules as Trump Warns of Retaliation
Getting Ready for the 3rd Time in Its History, Germany Approves Voluntary Military Service for Teenagers
Argentine President Javier Milei Evacuated After Stones Thrown During Campaign Event
Denmark Confronts U.S. Diplomat Over Covert Trump-Linked Influence in Greenland
Starmer Should Back Away from ECHR, Says Jack Straw
Trump Demands RICO Charges Against George Soros and Son for Funding Violent Protests
Taylor Swift Announces Engagement to NFL Star Travis Kelce
France May Need IMF Bailout, Warns Finance Minister
Chinese AI Chipmaker Cambricon Posts Record Profit as Beijing Pushes Pivot from Nvidia
After the Shock of Defeat, Iranians Yearn for Change
Ukraine Finally Allows Young Men Aged Eighteen to Twenty-Two to Leave the Country
The Porn Remains, Privacy Disappears: How Britain Broke the Internet in Ten Days
YouTube Altered Content by Artificial Intelligence – Without Permission
Welcome to The Definition of Insanity: Germany Edition
Just a reminder, this is Michael Jackson's daughter, Paris.
Spotify’s Strange Move: The Feature Nobody Asked For – Returns
Manhunt in Australia: Armed Anti-Government Suspect Kills Police Officers Sent to Arrest Him
China Launches World’s Most Powerful Neutrino Detector
How Beijing-Linked Networks Shape Elections in New York City
Ukrainian Refugee Iryna Zarutska Fled War To US, Stabbed To Death
Elon Musk Sues Apple and OpenAI Over Alleged App Store Monopoly
2 Australian Police Shot Dead In Encounter In Rural Victoria State
Vietnam Evacuates Hundreds of Thousands as Typhoon Kajiki Strikes; China’s Sanya Shuts Down
UK Government Delays Decision on China’s Proposed London Embassy Amid Concerns Over Redacted Plans
A 150-Year Tradition to Be Abolished? Uproar Over the Popular Central Park Attraction
×