Bank of England Governor Andrew Bailey has urged Chancellor John Healey to agree a budget that financial markets regard as credible, as pressure in the UK government bond market pushed medium-term borrowing costs to a fresh 19-year high.
Bailey said the fiscal stance must be credible and be seen as credible by investors. His intervention came as investors sold government bonds that had previously been treated as relatively safe assets, amid concern that inflation could rise.
Higher government bond yields increase the interest rate paid on public borrowing, placing additional strain on state finances and potentially narrowing the room for policy choices in a budget.
The governor's comments also carried a wider message for governments facing market scrutiny: fiscal decisions should avoid triggering instability that raises debt-servicing costs. The developments were reported by The Guardian.
For European policymakers and observers, the episode underlines how rapidly bond-market sentiment can influence national budget debates, particularly when concerns over inflation and public debt converge.