Are the markets scared of Liz Truss?

Look at the chart for interest rate expectations in isolation, and you might come to the conclusion that Rishi Sunak is right about Liz Truss’s fiscal policies. In June, markets were expecting rates to peak at around 3.5 per cent next year; now they are expecting them to reach close to 4.5 per cent. Moreover, as Truss’s victory came to be seen as inevitable, the FTSE 100 plunged from 7,550 on 19 August to 7,230 this morning – a fall of 4.2 per cent. The pound has fallen from $1.22 on 10 August to $1.15 now.

But hang on a minute. Markets have been revising their interest rate expectations all year. In February, long before anyone was talking about the possibility of a Truss government, markets were expecting rates to peak at 1.5 per cent. As for stock markets, they have been plunging around the world in the past fortnight.