Truss and Kwarteng did not brief BoE on mini-budget, dep governor Cunliffe says

Bank of England Financial Stability Report Press Conference
Sir Jon Cunliffe (far left), the Bank’s deputy governor of financial stability, told the treasury select committee today the government did not brief the central bank on their fiscal plans (Photo by Stefan Rousseau - WPA Pool/Getty Images)

Liz Truss or former chancellor Kwasi Kwarteng did not tell the Bank of England of their plans to slash taxes £45bn in last month’s botched mini-budget, one of the central bank’s executives said today.

Sir Jon Cunliffe, the Bank’s deputy governor of financial stability, told the treasury select committee today the government did not brief the central bank on their fiscal plans.

The central bank is usually given a heads up before a budget is delivered.

Steep moves in UK debt markets in the weeks after the mini-budget on 23 September were “outside of historical experience,” he said.

Yields on the 30-year gilt surged to their highest level in over 20 years, triggering a near fire sale of government bonds by liability driven investment (LDI) funds in a bid to generate cash to repay creditors to cover sudden losses.

Yields and prices move inversely.

Those wild market movements forced the Bank into a £65bn emergency bond buying package to put a lid on rates. The scheme ended last Friday.

The risk of contagion from financial instability to the rest of the economy as a result of LDI funds ditching bonds rapidly “has been dealt with” by the Bank’s intervention, Cunliffe said.