Britain’s new government announced a sweeping series of tax cuts on Friday, betting it had found the path to economic growth despite high inflation.

But the market verdict was swift and negative: The value of British stocks, bonds and the pound sank to new lows against the U.S. dollar, not seen since 1985.

The plans will require large increases in government borrowing and have raised expectations that the Bank of England will need to raise interest rates even more aggressively to stop inflation. This will add even more to the cost of these tax cuts and previously announced spending plans to shield households and businesses from the soaring cost of energy.

After the announcement by the new chancellor of Exchequer, Kwasi Kwarteng, the FTSE 100, Britain’s benchmark stock index fell more than 2 percent.

But the most eye-catching market moves were in British government bonds and the pound.

Bond yields, a measure of borrowing costs,

Keep reading this article on The New York Times Business.

Leave a Reply