BlueBay AM: Neil Mehta on today's budget announcement

BlueBay AM: Neil Mehta on today's budget announcement

October 17, 2022

Monetary policy UK
Engelse pond.jpg

Following the budget announcement made by the Chancellor today, Neil Mehta, Portfolio Manager at BlueBay has provided the commentary below.

It’s taken a monumental economic U-turn from the government to reassure UK markets. The new chancellor essentially scrapped all of the mini-budget announced three weeks ago and went the extra mile by limiting the energy price cap commitment to April 2023.

We think the government has done enough for now to stave off an unwelcome market reaction - we could see some stabilisation in markets after a tumultuous few weeks. Politically, the damage is almost irrevocable, and we expect the PM to be replaced after having lost credibility and the confidence of her own party and the public.

Today’s announcement will put less pressure on the BoE to hike rates aggressively over the coming months and will also restore some credibility to the UK’s fiscal stance, however the wounds will take a long time to heal. The UK economy faces long-term challenges regardless, as it enters a period of slumpflation - UK assets will get a reprieve after today, but the long-term trend remains challenging.

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