UK Financial Crisis of 2022: Retrospective Diagnosis and Policy Recommendations

Ethan Ilzetzki

No 2408, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: The UK government’s “mini-budget” announcement on September 23, 2022 sent yields on UK government bonds soaring at a daily rate not seen since November 1988, brought the value of the pound to all-time lows, lead some mortgage providers to suspend lending, and dropped the UK pension system to a liquidity crisis. The worst pressures on the UK economy and financial system appear to have subsided. Nevertheless, risks still remain and some problems — particularly with mortgage affordability - are likely to persist at currently projected interest rates. This note begins with a diagnosis of the causes and nature of the crisis and continues with policy recommendations for current circumstances and groundwork that should be set pre-emptively, in case interest rates rise again beyond current expectations.

Pages: 17 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ban and nep-inv
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