THE Bank of England has been forced to intervene in an attempt to avoid a full-blown financial crisis after Liz Truss’s government announced swingeing tax cuts for the rich.

It comes after the collapse of the pound following Chancellor Kwasi Kwarteng’s “mini-budget” announcement last Friday.

The central bank said that if the current “dysfunction in this market [were] to continue or worsen, there would be a material risk to UK financial stability”.

It announced it would launch a temporary UK Government bond-buying programme on "whatever scale is necessary" as an emergency move.

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In a statement, the Bank of England said: “In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.

“To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury.”

The economics editor of the FT, Chris Giles, tweeted: “This is......bad.”

He went on: “Entirely self-inflicted wound, forcing the BoE to restart the printing presses to bail out pension funds which were falling over this morning........ because no one in financial markets liked the ‘mini-budget’.

“This is now financial crisis to the UK. BoE will seek to stabilise – as it did after Brexit vote – let's hope so.”

Professor Richard Murphy tweeted: "The Bank of England has restarted quantitative easing today precisely because the Truss government has failed to manage the economy – a staggering achievement in three weeks."

The crisis was triggered by Kwarteng’s mini-budget on Friday when he unveiled a massive £45 billion tax cut funded by Government borrowing.

A Treasury spokesperson said: “The Bank of England, in line with its financial stability objective, carefully monitors financial markets and any potential risk to the flow of credit to the real economy, and subsequent effects on UK households and businesses.

“Global financial markets have seen significant volatility in recent days. The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds from today in order to restore orderly market conditions.

“These purchases will be strictly time-limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury.

“The Chancellor is committed to the Bank of England’s independence. The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives.”

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The news comes after the International Monetary Fund (IMF) issued an extraordinary statement calling on the Tory government to "reevaluate" its policy.

The IMF said in a statement: “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy.

“Furthermore, the nature of the UK measures will likely increase inequality.”