Economic troubles continue to pile up in the U.K. as inflation and a cost-of-living crisis continues to batter households and businesses. The consumer price index soared 10.1% in September, more than five times the Bank of England's 2% target, with food, energy, transport and household goods all the biggest contributing factors. A double digit increase was first seen in a July, but a return to the 10% mark is another alarm for the BoE, which will likely be forced to act aggressively in November (100 bps hike?).
Bigger picture: U.K. policymakers have already dealt with a financial meltdown over the past month as sterling, gilts and stocks got rocked. The government has since reversed nearly all its proposed tax cuts, as well as less generous relief on household energy costs. The Bank of England still expects to go ahead with its quantitative tightening program from November, though it will only sell short and medium-dated bonds, with the 30-year gilt at the center of the recent fears plaguing the pension industry.
"I understand that families across the country are struggling with rising prices and higher energy bills," said Jeremy Hunt, the new Chancellor of the Exchequer. "This government will prioritize help for the most vulnerable, while delivering wider economic stability and driving long-term growth that will help everyone."
How to fund all of this? Looking to bring Britain's deficit under control, Hunt is reportedly preparing some fresh windfall taxes on banks and extending those imposed on energy company profits. "I am not against the principle of taxing profits that are genuine windfalls," he told parliament. "But... in the energy industry, it is very cyclical industry and there are businesses that have periods of feast and famine and you have to be very careful that you don't tax companies in a way that drives away investment. We have said that nothing is off the table."
ETFs: NYSEARCA: EWU , NYSEARCA: FXB , NYSE: IRL , NYSEARCA: EIRL , BATS: EWUS , NYSEARCA: FLGB , NASDAQ: FKU , NYSEARCA: HEWU
For further details see:
U.K. inflation returns to double digits; More windfall taxes on tap?