The UK was just hours from a possible complete financial meltdown after former prime minister Liz Truss’s disastrous mini-budget, the governor of the Bank of England has confirmed.
Andrew Bailey said the bank was forced to step in “quickly” and “decisively” to stave off a “very real threat to financial stability” after markets were spooked by the disastrous £45bn unfunded tax giveaway.
“We certainly reached a point where markets were very unstable, and these were core markets, this is the government bond market, which is in many ways the most core of all,” Bailey told Channel 4 News on Thursday.
“And it was becoming unstable and it was affecting … pension funds for instance, and how they were operating.
“And our worry was that when you get into that situation, this can easily spread very rapidly and then you have a huge job on your hands to get it back under control.
“So we had to step in quickly and we had to step in quite decisively.”
Asked if the UK was close to potential total meltdown, Bailey said: “I think at that point when we intervened, I can tell you that the messages we were getting from the markets were that it was hours.”
Bailey’s comments came after the Bank of England announced its largest interest rate increase in three decades as it tries to tackle high inflation, boosting its key rate by 75bp to 3%.