There is a risk that UK ends up in a "doom loop" - economist Julian Jessop

Signage is seen outside a currency exchange office in London, Britain, September 27, 2022. REUTERS/Hannah McKay

LONDON, Sept 28 (Reuters) - Economist Julian Jessop warned on Wednesday that Britain's economy could end up in a "doom loop" of falling currency and rising interest rates, but stressed that he believed recent market moves had been an over reaction.

Jessop provided informal advice to now Prime Minister Liz Truss during her leadership campaign to succeed Boris Johnson this summer.

The International Monetary Fund (IMF) and ratings agency Moody's criticised Britain's new economic strategy, as investors braced for more havoc in markets that has already forced the Bank of England to promise "significant" action. read more

"I think it is correct to be concerned about the fall in the pound and the rise in long term interest rates, and there is a risk that we do end up in a doom loop of a falling currency, rising interest rates and weaker growth which obviously would undermine the agenda the new government," he told Radio 4.

"But I also think that people have overreacted in the heat of the last few days."

Jessop said that almost all the measures the government has taken had been things he would expect the IMF to welcome, citing a package to support households with energy bills as one example.

Reporting by William James; Editing by Kate Holton and Michael Holden

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