Bloomberg UK Politics Growth Halved: Rachel Reeves' Mixed Economic Bag
Mar 26, 2025
The podcast dives into the latest economic forecasts, revealing a significant downgrade in expected growth. Chancellor Rachel Reeves faces fiscal dilemmas with proposed spending cuts aimed at restoring financial stability. Market reactions to these announcements are dissected, shedding light on complex interactions between fiscal policy and the economy. Listeners also explore the tension between welfare cuts and defense spending, alongside the challenges of translating budget plans into tangible outcomes.
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Chancellor's Tight Fiscal Balance
- Rachel Reeves faced a tough task balancing worsening public finances without losing market or party credibility.
- The OBR halved economic growth forecast to 1%, prompting spending cuts and future growth investments.
Market Mixed Reaction to Spending News
- The market was surprised by Reeves' announcement of real-time year-on-year department spending increases.
- Initial gilt yield rises reversed after DMO announced slightly less borrowing than expected.
Shift to Shorter-Dated Debt
- The UK is shifting to selling less long-dated bonds due to current high interest rates.
- Shorter bond maturities are seen positively by markets and reduce government cost risks.