"These are still the early stages of recovery. Avoiding an unintentional and premature tightening of financial conditions," while "staying the course with our deficit-reduction plan will help counter domestic risks to growth."
- U.K. Chancellor of the Exchequer George Osborne
During the speech in East London Britain's Chancellor George Osborne claimed the economy has turned the corner and vindicated the government's pledge to pushing ahead with austerity measures. Even though the pace of growth of Britain's economy in the second quarter has been upwardly revised due to strong trade, and activity in construction and manufacturing sectors, Osborne stressed out that a change in current course or any plans to abandon his programme of spending cuts would have a disastrous effect. Since 2010 this austerity programme has been the government's cornerstone policy.
His comments also come a month after BoE's Governor Mark Carney introduced his forward guidance and pledged not to increase interest rate before late 2016. However, despite this commitment and various attempts to assure market participants there will be no shifts in policy any time soon, investors are still betting rate will rise before this date. On the other hand, Osborne said this message has started to get through to consumers and executives, which in turn should strengthen confidence. Nevertheless, on Monday yields on the U.K 10-year government bonds inched higher 2 basis points, reaching 2.96%, the highest since 2011.
© Dukascopy Bank SA