OECD Cuts Growth and the IMF Warns on Debt, Five Weeks From the Budget
Britain was among the economies marked down by the OECD today, which now expects 1% growth next year rather than 1.1%, though it upgraded this year to 1.1%. The IMF’s Kristalina Georgieva told the BBC that global shocks had been “pushing debt levels up like a staircase not to heaven” with “no action to contain that service cost”. Mr Burnham conceded the country was “over-exposed”. Gilt yields climbed towards 5.36%; sterling fell to $1.3249.
Two forces are squeezing John Healey before his first Budget. The Middle East war and the Ukraine war have pushed crude higher, which feeds fuel and energy bills and therefore inflation; inflation feeds the interest bill on index-linked debt, on top of August’s unexpected £18.3bn borrowing overshoot. Today’s gilt move — with oil up 3.5% on the same afternoon — shows how directly the war now prices into British borrowing costs. The Prime Minister stood by his year-old argument that Britain should be less “in hock” to the bond markets, a line that unsettled investors when he first made it. Watch the gilt curve into late October.