Bank of England Governor Andrew Bailey said on the 8th that governments around the world need to step up efforts to restore confidence in fiscal policy. Global bond markets are under selling pressure amid heavy borrowing and accelerating inflation tied to the war in Iran, and UK government bond yields also rose to multi-decade highs that day. Speaking at a conference hosted by the Central Bank of Turkey in Istanbul, Bailey noted that fiscal policy, whatever its direction, must be credible and aim for stability, and must be seen that way by markets. "This approach is needed more than ever," he said. The remarks came less than three weeks before UK Finance Minister Healey's first budget announcement, with rising borrowing costs linked to the conflict in the Middle East expected to constrain room for budget planning. Bailey also said the central bank must remain committed to its mandate of containing inflation, reiterating his view that signs of higher energy prices feeding into broader inflation in the UK remain "fairly limited."
Bailey's fiscal-credibility warning and global bond selling pressure push UK gilt yields to multi-decade highs, raising the 10Y yield.
Bailey stresses fiscal credibility and inflation-fighting mandate amid rising UK borrowing costs, a supportive signal for sterling.
