(Bloomberg) — Rachel Reeves is safe in her position as Chancellor of the Exchequer, one of the most senior members of Prime Minister Keir Starmer’s cabinet said, after the market turmoil that hit UK assets in recent days raised questions about the future of Britain’s finance minister.
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“Rachel Reeves is the chancellor for a good reason, because she’s the right person to do the job,” Cabinet Office Minister Pat McFadden, a key ally of the prime minister, told Times Radio on Monday. When asked if he thinks she’ll survive until the fall, he said: “Yes, I do.”
Reeves has come under pressure as a global slide in bonds hit UK borrowing costs particularly hard amid doubts over the government’s fiscal position. The moves continued on Monday, with the 10-year gilt yield pushing back toward last week’s peak of 4.92% — the highest level since the global financial crisis in 2008.
With the pound also taking a hammering, Reeves is facing questions over whether she’ll make any kind of policy intervention to address the situation. The chancellor is due to return to the UK on Monday after a visit to China, where she said she would take action if necessary to ensure the government is meeting its self-imposed fiscal rules.
Because of the increase in borrowing costs and associated rise in Britain’s debt interest costs, economists forecast that the government is likely to be in breach of its main fiscal rule, to ensure day-to-day government spending is covered by tax receipts. Reeves is considering cutting public spending to avoid breaking the rule, according to people familiar with the matter.
Reeves is due to give a formal update on the UK’s economic position on March 26, when the government’s fiscal watchdog, the Office for Budget Responsibility, publishes its latest forecasts. She is also expected to give a speech focused on growth in the coming weeks.
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