Laith Khalaf, head of investment analysis at AJ Bell comments on the decision to delay the fiscal statement previously scheduled for 31 October until an Autumn Statement on 17 November:
“The delay to the Halloween fiscal statement is eminently sensible given the change at the top of government. Markets aren’t too concerned about the precise timing of the fiscal event, they simply want to know the government isn’t going to totally junk its fiscal rules and embark on an unfunded spending spree, something they are more confident of now Sunak and Hunt are directing proceedings. What markets definitely don’t want to see is the Chancellor rushing out a fiscal statement that the prime minister isn’t totally on board with, prompting further policy U-turns that cast even more doubt on the UK’s economic credibility.
“As well as giving time for the politicians to get their ducks in a row, the delay also provides a bit more breathing space for the OBR to prepare its figures. The OBR normally finalises the ‘pre-measures’ forecast it presents to the Chancellor 14 working days before Budget day. Given the huge changes we have seen in market prices and in government policy over the last few weeks, it’s probably a good thing the OBR has been given more room to incorporate recent developments into its deliberations.
“One consequence of the delay to the Chancellor’s statement is that it does leave the Bank of England flying somewhat blind on fiscal policy when it makes its interest rate decision next Thursday. That may well spell a more cautious approach to hiking rates next week, especially seeing as there is a December policy meeting at which they can adjust their stance in the light of the policies announced by the Chancellor in the Autumn Statement. Markets are currently pricing in a 0.75% hike next Thursday, which would take base rate to 3%, its highest level since the financial crisis.”
