UK Chancellor Rachel Reeves faces mounting pressure as rising borrowing costs threaten her fiscal plans. Just months after delivering her first Budget, Reeves risks being forced to implement tighter fiscal policy as early as March to meet budgetary constraints. The situation is particularly damaging given Reeves' previous claims of achieving a 'clean slate' for the UK's finances. The primary driver of this fiscal strain is the global rise in government borrowing costs, exacerbated by concerns about the UK's potential entry into stagflation. This, coupled with anticipated debt sales, has pushed UK borrowing costs to their highest levels in years, impacting the value of sterling and raising fears of a UK recession.
Less than three months after delivering her first Budget, Rachel Reeves is running into treacherous fiscal waters as rising UK borrowing costs erode her room for manoeuvre. There is now a real risk that the chancellor will be forced to impose tighter fiscal policy as soon as March, when the Office for Budget Responsibility presents its forecasts, as she seeks to meet her self-imposed budget constraints.
” OBR forecasts due on March 26 will also set out a revised view of growth, which also has a significant bearing on the public finances. GDP readings in the tail-end of last year were weaker than expected and the BoE estimates the economy failed to grow in the final three months of 2024. The poor data made the OBR’s October forecast for economic growth of 2 per cent in 2025 look vulnerable, analysts said.
UK Borrowing Interest Rates Stagflation Fiscal Policy Rachel Reeves
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