No country wants external developments to drive up its borrowing costs and weaken its currency, which is what the UK is facing today, together with serious cyclical and structural challenges. But if the British government responds appropriately, recent market volatility might turn out to have a silver lining.
CAMBRIDGE – The British government was right to describe the recent bout of market volatility in the United Kingdom as having been fueled principally by “global factors” – in particular, a sharp rise in US bond yields. It was also right in touting how well UK markets have coped with the turmoil. But no one should downplay the additional challenges the UK economy will confront in the months ahead, the structural weaknesses that are compounding its vulnerability, or the policy action that is urgently needed.
CAMBRIDGE – The British government was right to describe the recent bout of market volatility in the United Kingdom as having been fueled principally by “global factors” – in particular, a sharp rise in US bond yields. It was also right in touting how well UK markets have coped with the turmoil. But no one should downplay the additional challenges the UK economy will confront in the months ahead, the structural weaknesses that are compounding its vulnerability, or the policy action that is urgently needed.