UK Borrowing Costs Rise Amid Finance Minister Doubts
Uncertainty surrounding the future of UK Finance Minister Rachel Reeves triggered a spike in UK government borrowing costs. The yield on the 10-year gilt jumped significantly, reflecting market unease.
Political Uncertainty and Market Reaction
Prime Minister Keir Starmer's ambiguous response to questions about Reeves's position fueled speculation, even after assurances from his press secretary that she has his full backing. The British pound also weakened against the U.S. dollar as investors reacted to the news.
Fiscal Concerns Addressed
This comes amid broader concerns about the government's fiscal policies, particularly after a U-turn on welfare reforms erased £5 billion in planned savings. Economists have pointed out the government is under pressure to raise taxes to cover any shortfall.
Expert Analysis
Experts suggest that the market fears Reeves' departure could lead to a relaxation of fiscal rules and increased borrowing. Ashley Webb at Capital Economics noted that investors saw risks linked to Reeves' possible departure.
