Bank of England governor Andrew Bailey has urged Chancellor John Healey to ensure the UK budget restores confidence among financial markets, following a renewed rise in government borrowing costs.
Medium-term UK borrowing costs have climbed to a 19-year high as investors sell government bonds amid concerns about persistent inflation. The sell-off has put fresh attention on the cost of servicing public debt and the risks created by market volatility.
Bailey said governments facing pressure from investors must pursue fiscal policies that markets regard as dependable. His intervention underlined that the substance of a fiscal plan, as well as investors' confidence in it, can affect the interest rates paid on government debt.
Higher bond yields can increase the cost of new borrowing for governments and shape wider financial conditions. The warning comes as investors reassess assets once viewed as relatively secure, according to The Guardian's report on the rise in UK borrowing costs.