Rachel Reeves Claims ‘Iron Grip’ on Finances Amid Rising Borrowing Costs

London: Rachel Reeves is really stepping up her game. She’s been making headlines, saying she has an “iron grip” on the public finances. This comes as the bond market is going through a bit of a rough patch.

The cost of borrowing for the government has hit levels we haven’t seen since the 2008 financial crisis. That’s got a lot of folks worried about whether the chancellor can stick to her fiscal rules. A Treasury spokesperson made it clear that sticking to these rules is a must, and they’re determined to keep a tight hold on the finances.

Analysts are sounding alarms, saying the rising borrowing costs could wipe out the £9.9 billion cushion Reeves had set aside in her budget. But the Treasury is brushing that off as just speculation. Investors are getting jittery, and it’s showing in the markets. The pound has dropped to its lowest against the dollar since last April, and the FTSE 250 index is also feeling the heat.

Brad Bechtel from Jefferies pointed out that the UK is experiencing a mini version of the bond market chaos we saw after Liz Truss’s mini-budget last year. The yield on UK 10-year government bonds has climbed to 4.825%, the highest in over 16 years.

With the pound slipping and the markets on edge, Kathleen Brooks from XTB noted that the UK is becoming a target for bond vigilantes. The focus on the UK’s economic situation might stick around, especially with new inflation data coming out soon.

Looking ahead, the Office for Budget Responsibility is gearing up for a new economic forecast, and Reeves plans to address it in the House of Commons later this month. The Treasury insists there won’t be any new tax hikes, so spending cuts might be on the table to meet those fiscal rules.

Paul Johnson from the Institute for Fiscal Studies mentioned that the recent bond market shifts could erase the little headroom Reeves had. Without tax increases, the only way to balance things out is by cutting spending, which is already tight.

The FTSE 250 index took a hit, dropping 2%—its biggest fall since last August. Meanwhile, the FTSE 100 index remained steady, with some sectors like housebuilders and retailers struggling, while banks are seeing a boost as interest rates are expected to stay high for a while.