Bailey urges credible debt plans as UK borrowing costs rise

Bank of England Governor Andrew Bailey said governments should make credible commitments to control borrowing and support economic stability, as rising energy prices and volatile bond markets put pressure on public finances. He made the remarks at a conference in Istanbul on October 8, ahead of the UK government’s scheduled tax and spending announcement on October 28. Bailey said fiscal policy should be credible, directed toward stability and viewed that way by markets. Realistic commitments to rein in debt could reduce investors’ demands for higher returns when shocks occur, he said. He added that he was not commenting on specific fiscal decisions, while emphasizing that governments should consider how spending and borrowing affect inflation and financial stability. His remarks came as UK government borrowing costs rose sharply. The yield on 10-year gilts reached 5.515% by lunchtime on October 8, its highest level since July 2007, before falling back during volatile trading. Yields on 20- and 30-year gilts also rose to their highest levels in decades, according to market reporting. Higher yields mean the government faces greater costs when borrowing.