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Oct 12 • 4 tweets • 2 min read
As ITV political editor, what I am interested in tomorrow is US CPI inflation. Because if it’s 8.2% or more, US interest rates are set to go higher as would dollar, and we would be heading for US hard landing (recession) and markets rout. 7.8% or lower and maybe we…
can see peak of US rates. So on higher US inflation, the pound and UK government bonds fall more, and UK interest rates - including mortgage rates - rise yet more. To put it another way, slightly lower US inflation bails out Kwarteng and Truss, higher may well…
see them evicted. That 7.8 to 8.2 US inflation spread is probably the difference between whether Truss and Kwarteng just about getting away with their mini-budget or it wrecking them and our economy. It is all about whether the dollar surge is near the peak. Good…
job I am interviewing deputy director of IMF Gita Gopinath on tonight’s #peston, ITV 10.45, and here on Twitter via @itvpeston at 9. And I imagine @Jacob_Rees_Mogg, also on show, will have something to say about the UK’s vulnerability

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More from @Peston

Robert Peston Profile picture
Oct 13
One of the odd things about the libertarian right that has seized control of the Conservative party is that they believe in capitalism and markets only up to the point where markets give them an answer they don’t like. Thus the only serious argument Truss and Kwarteng had for…
abolishing the top rate of tax and not putting up corporation tax (as Sunak had planned) was to make the UK a more attractive place for investment. But then global investors looked at the unfunded tax-cutting stimulus in conditions of high and rising inflation,…
decided T and K were reckless, and dumped sterling assets. In the process the cost of capital in the UK rose disproportionately. So, far from making the UK a better place to invest, they made it a much riskier place. They achieved the precise opposite of what they…
Read 6 tweets
Robert Peston Profile picture
Oct 13
A couple of important things. First I am as confident as I can be that early next week Truss and Kwarteng will cancel their promise NOT to increase corporation tax by 6 percentage points to raise £18bn, in one of the most humiliating ever tax u-turns 1/10
Second, I am equally confident that the Bank of England’s £65bn rescue package for overly indebted pension funds will roll off tomorrow without causing bond prices to fall off a cliff edge. 2/10
Here’s why. 1) Today’s astonishing rise in government bond prices and fall in bond yields (at the 30 year maturity, the yield fell by 0.5%, or 50 basis points, in 24 hours) has been almost all due to rumours of the gigantic tax u-turn. Investors have priced in the u-turn. 3/10
Read 10 tweets
Robert Peston Profile picture
Oct 12
On #peston tonight, @Jacob_Rees_Mogg says that if @OBR_UK does not - in Kwarteng's medium term fiscal plan on 31 Oct - show government debt falling after 5 years, other forecasters are available. Mogg: "Its [the OBR's] record of forecasting is not enormously good. So...
"the job of Chancellors is to make decisions in the round rather than to assume that there is any individual forecaster who will hit the nail on the head…There are other sources of information. The OBR is not the only organisation that is able to give forecasts.” Investors...
who've been dumping UK government bonds and driving up interest rates, and who've been looking for the government to make a credible commitment to stop the inexorable rise in the national debt before buying those bonds again, are unlikely to be reassured. Bumpy road ahead. For...
Read 4 tweets
Robert Peston Profile picture
Oct 11
If government bond sales by pension funds are the fundamental cause of a potential systemic crisis that could hurt us all, as the Bank of England says, why are pension funds taking so little advantage of the Bank’s offer to buy £65bn of the bonds, and why are bond prices…
still falling? It seems to me the only explanation for what is happening is that margin calls on pension funds’ LDIs - or the trillion pounds of their debt that’s secured against UK government bonds - are not in fact the main cause of the spike in bond yields, or…
at least they are only a small part of it. It is the other way round. The spike in bond yields is prompting margin calls, which is then causing pension funds to sell assets, of which gilts are only part. This is
Read 10 tweets
Robert Peston Profile picture
Oct 5
The Chancellor and the Treasury are "hugging" the Bank of England and the Office for Budget Responsibility again - in the words of a senior government member - having more-or-less repudiated them in the days before the ill-fated mini-budget. But a return to more orthodox...
fiscal practices, that would include advance scrutiny by the OBR of spending and taxes, and announcing such BEFORE the Bank of England announces interest-rate changes, doesn't mean interest rates will stabilise at around current levels. Far from it. Let's assume @Kwarteng...
brings forward his Medium Term Fiscal Plan to later this month (as per government briefings), from the scheduled date of 23 November (though eccentrically he yesterday told @LiamHalligan he was sticking to the 23 Nov date), that is likely to lead to another lurch upward ...
Read 14 tweets
Robert Peston Profile picture
Oct 4
When I asked the PM just now whether she still supported the abolition of the top rate of tax as a matter of principle, she said “I do support a lower simpler tax system”, though the plan is dead for now. She reiterated that…
she hasn’t decided whether to uprate benefits in line with 10% inflation, but won’t sack Penny Mordaunt for a breach of collective cabinet responsibility in her call for universal credit to be inflation-proofed. I talked to her about…
the collapse of unity and discipline in her party under her leadership, and she said: “We are working with our MPs, this is a team, this the Conservative team, putting forward our policies for the country”. The problem she has…
Read 5 tweets

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