There has been much wringing of hands about the recent increase in the UK government’s borrowing costs. This obviously matters as it will constrain fiscal policy, but the increase in long-term interest rates is not unexpected and it does not necessarily represent a loss of confidence in the government. What matters is identifying the underlying cause of the increase in borrowing costs. And to manage economic shocks better, we urgently need to rewrite the fiscal rule.

Once again, money markets are