UK crisis offers glimpse into future for others

When the UK government announced new fiscal measures – tax cuts on top of already announced subsidies on households’ and firms’ energy bills – the financial market went into a frenzy. It questioned the credibility of those plans. We see the package of measures – even if a small share of the tax cuts has since been rolled back – ultimately leading to higher inflation. That, plus the damage to credibility, means the Bank of England will likely have to hike interest rates further, pushing the UK into an even deeper recession. This is a clear example of a new, more volatile regime in action....