U.K. Business Secretary Jacob Rees-Mogg blamed the Bank of England's interest rate policy, not his government's tax-cutting plans, for the gyrations in financial markets.
He told a BBC reporter that you suggest something is causal. The Bank of England did not raise interest rates as much as the Federal ReserveFederal Reserve did, which has resulted in an effect on pension funds, because of some quite high-risk but low-probability investment strategies. The Bank of England lifted its benchmark interest rate by half percentage point, compared to the 75 basis point hike from the Fed. I think that jumping to conclusions about causality is not meeting the BBC's requirement for impartiality, it is a commentary rather than a factual question. Financial markets would have to operate with a lag on monetary policy, which was conveniently timed to end as fiscal plans were announced, according to Rees-Mogg. An instrument to examine is the British pound versus the dollar, which by nature would be sensitive to the U.K. vs. the U.S. rate differentials the cabinet minister mentioned mentioned. The pound was trading at $1.1345 about ten minutes before the Bank of England decision, and at $1.1337 about two hours later. It went lower from there, weakening to $1.1266 at 5 p.m. local time. The pound was at $1.1189 ten minutes before Chancellor Kwasi Kwarteng delivered the mini budget, sliding to $1.1064 about two hours later, and dropping to $1.0910 at 5 p.m. local time.