The Prime Minister told MPs in the House of Commons on Wednesday that she will “absolutely” not cut spending to balance the books.
In the latest sign of market turbulence sterling fell further against the euro and dollar amid increased government borrowing.
She insisted the Government is making sure “we protect our economy at this very difficult time internationally”.
“As a result of our action – and this has been independently corroborated – we will see higher growth and lower inflation,” she told MPs.
But economists have said it will cost tens of billions worth of spending cut ir tax rises to restore confidence.
As a result the City’s main stock market index continued to fall, and by midday trading on Wednesday it was down 42 points to 6843, which is a fall of 0.61%.
The FTSE 250 fell by 0.1% and sterling rose to 0.9% after the Bank of England governor warned pension funds they only have until Friday to mend liquidity issues as in three days time the emergency bond buying will stop.
Oliver Allen, senior markets economist at Capital Economics, told Reuters: “While more of the action in terms of this crisis is playing out in the gilt market and the pound, it does seem like UK equities, particularly the domestically focused companies, are struggling by more than you might expect if it were just global factors weighing on it.
“That makes sense given one sharp feature about this crisis is rise in bond yields.
“There are worries about the housing market in the UK, and it is posing a darker cloud over the economic outlook.”
Craig Inches, head of rates and cash at Royal London Asset Management, told Reuters, “To a global investor the UK looks a mess and therefore global investors don’t want to step in and buy yields at attractive levels until the UK gets its house in order.”
