© Reuters. A person exits Bank underground station in the City of London financial district in London, Britain, June 11, 2021. REUTERS/Henry Nicholls/File Photo
LONDON (Reuters) -Britain will have to be nimbler in the way it manages the public finances if interest rates go up, because government bonds carry shorter maturities than in the past and are increasingly linked to inflation, the head of the country’s budget watchdog said.
Richard Hughes, chairman of the Office for Budget Responsibility, said the government would have less time than in the past before its borrowing costs go up as growth and inflation return.
Even in the most benign scenario, strong economic growth would not significantly lower the stock of public debt – which has soared above 2 trillion pounds ($2.7 trillion) as a result of the COVID-19 crisis – he told lawmakers.
“The government’s ability to get breathing space from faster growth before interest rates catch up, or indeed (from) higher inflation before interest rates catch up, is just a lot less than it’s been in the past,” Hughes said.
Official data published earlier on Wednesday showed the government’s debt servicing costs rose to a record 8.7 billion pounds in June, pushed up by rising inflation.
Hughes said there needed to be clear and open communication between the Bank of England and the government about the likely path for interest rates.
($1 = 0.7312 pounds)
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.