The wise men of Trussonomics are more divided on this subject than one might think.
The risks of an adverse market reaction were obvious in advance of Kwarteng’s statement, and a wise Chancellor would have taken heed of it. Unfortunately, the Permanent Secretary had been dismissed and he ploughed on apparently oblivious to the risks.
The Prime Minister and Chancellor will have been hoping for a higher rate rise today. Trussonomics requires a tighter monetary policy.
He will need to outline clearly his fiscal principles, so the market understands the commitment to fiscal discipline through reducing the ratio of debt to GDP.
Of course one must not be complacent. I have worked long enough in the markets to know that when they smell blood there can be trouble.
Want an example of economic fatalism? Just read reactions to the Foreign Secretary criticising the Bank of England’s inflation performance.
Nobody is talking about a return to the days of politicians setting interest rates, but it must reckon with its mistakes.
My guess is that she is too smart to allow the worst case scenario to happen. To do that, however, she is going to have to move swiftly from focusing on winning the confidence of Conservative MPs and party members to winning the confidence of the markets.
She explains why she changed her mind on Brexit, confirms she would change the Bank’s mandate, and says she would be happy to find a place for Sunak in her team.
Businesses and employees are only responding to monetary conditions set by the Bank of England, where the real responsibility lies.
We need a supply-side strategy from the whole of government to produce more energy, food, and other goods and services.
If the party really wants to honour its past, then it must face up to problems of the present.
The Government seems to have no plan to communicate as cost of living woes multiply. Here’s a first stab at one.
The first of a series of five articles on ConservativeHome this week about the main challenges that await the new Prime Minister.