HUIG's 3 Things this Week: Oct 21
1. Liz Truss resigns as U.K. Prime Minister (WSJ)
U.K. Prime Minister Liz Truss announced this Thursday, Oct 20, 2022, she will resign from her current position. This makes her the shortest-serving Prime Minister in the U.K.’s history, lasting in the office for approximately six weeks. Her stay on 10 Downing Street, London, ended after she recently announced a tax-cutting plan that quickly backfired on Britain’s economy and its image amongst investors & the greater public around the world.
2. FED to raise interest rates again (WSJ)
With the next FED meeting occurring Nov. 1-2, officials have singled a high likelihood of raising interest rates by 0.75 percentage points. As high inflation can be felt across the country and in financial markets, the FED’s intentions behind its decision is to prevent “an unnecessarily sharp slowdown” (WSJ, 2022). We are currently seeing the most significant and aggressive speed at which the FED has been raising interest rates since the 1980s. With the remaining partial impact from the Covid-19 pandemic and the ongoing war in Ukraine resulting in a multitude of supply side issues, the FED aims to utilize everything within its power to slow down economic activity in hopes of lowering inflation back to the 2% levels.
3. European energy crisis cripples Europe (WSJ)
The ongoing war between Ukraine and Russia has exposed the vulnerability of Europe’s energy sector and possesses dramatic implications for the larger economy. The European economy has undergone its most significant energy shock since the 1970s. While the current implications can primarily be felt when looking at household energy prices and gas bills, the more significant threat is the decrease of output by the economy. For example, businesses within Germany are already announcing that they’ll soon be unable to fulfill their orders and will be forced to lay off workers in order to secure survival. Therefore, unemployment is expected to rise while overall spending power is expected to behave inversely. While the European Union is starting to rethink its approach to the energy sector, it might be too little too late. Financial markets at large are expected to record losses.
Sugden, J. (2022, October 21). Who will be the U.K.'s next prime minister after Liz Truss? from Boris Johnson to Rishi Sunak. The Wall Street Journal. Retrieved October 23, 2022, from https://www.wsj.com/story/who-will-be-britains-new-prime-minister-after-liz-truss-f88c7979?mod=Searchresults_pos1&page=1
Timiraos, N. (2022, October 21). Fed set to raise rates by 0.75 point and debate size of future hikes. The Wall Street Journal. Retrieved October 23, 2022, from https://www.wsj.com/articles/fed-set-to-raise-rates-by-0-75-point-and-debate-size-of-future-hikes-11666356757?mod=hp_lead_pos3
Lounsbury for The Wall Street Journal, W. (2022, October 21). Europe's energy shock spurs rethink of liberalized gas markets. The Wall Street Journal. Retrieved October 23, 2022, from https://www.wsj.com/articles/europes-energy-shock-spurs-rethink-of-liberalized-gas-markets-11666354359
Image from: https://www.theguardian.com/australia-news/audio/2022/oct/24/after-the-end-of-liz-truss-whats-next-for-the-uk