“I must say that when I heard that we were suffering a shortage of wind to generate power, I was tempted to ask, ‘And when are the locusts due to arrive?’”
That was Bank of England Gov. Andrew Bailey joking in a speech late Monday as he summed up the “hard yards” facing the U.K., which include supply chain woes from COVID-19 and the country’s post-Brexit adjustment that have led to energy and food shortages.
“A number of these supply bottlenecks are not obviously a product of COVID, though others are. It is also possible that the economic fragility created by COVID has amplified the impact of other shocks — either that or the gods really are against us. I think it is more likely COVID amplifying at work,” said Bailey.
As for monetary policy, Bailey said the bank would “step in and adjust policy as needed,” stating that the shocks the economy has been seeing are likely temporary. The pound
climbed to above $1.37 following last week’s policy meeting, in which one member switched to a group that prefers stopping bond purchases immediately, and a majority said rates could rise as early as this year.
But the pound
was down nearly 1% to $1.3571 on Tuesday, as the dollar
surged amid soaring bond yields and expectations for tighter U.S. monetary policy. In step with higher Treasury yields, the yield on the 10-year U.K. gilt
jumped nearly 7 basis points to 0.933% , the highest level since May 2019.
Energy woes for the country continued as as natural gas prices
jumped 11% to a record of 223.94 pence a therm. And, the front-month Brent crude
topped $80 a barrel as an oil rally continued. The country has seen a run on petrol stations as a shortage of truck drivers to transport fuel has caused shortages and pumps to run dry.
The FTSE 100 index
was flat at 7,064 as other European indexes saw sharp declines, as it drew support from the heavily weighted energy sector. Surging alongside oil prices, Shares of BP
One company standing out on the downside was Go-Ahead Group
Those shares slid 24% after the transportation company said the U.K. Department for Transport has appointed the “operator of last resort” to take over its Southeastern franchise on Oct. 18, when its current agreement expires.
The company said it had erred over related profit share of the Southeastern unit, and its chief financial officer, Elodie Brian, has resigned with immediate effect. Go-Ahead said it will have to delay its financial results for the year ended July 3 again.