UK finance minister Kwasi Kwarteng has been fired as the government waters down tax cuts

• UK finance minister Kwasi Kwarteng was fired from his role on Friday, to be replaced by Jeremy Hunt.
• Kwarteng's tax cut proposals have rattled markets for weeks, with yields on gilts soaring.

UK Chancellor of the Exchequer Kwasi Kwarteng has been fired from his job as Prime Minister Liz Truss waters down her tax-cutting proposals.

Kwarteng confirmed Truss had "asked him to stand aside" in a statement released Friday. Former foreign minister Jeremy Hunt will replace Kwarteng as finance minister, the prime minister's office said.

After firing Kwarteng, Truss held a press conference to say her government will water down the tax cuts it had proposed. She announced a U-turn on its plans to scrap a rise in corporation tax from 18% to 25% next April.

That tax hike – a policy introduced by Truss's predecessor Boris Johnson – will now go ahead as planned and will raise an extra 18 billion pounds ($20 billion) a year.

"It is clear that parts of our mini-budget went further and faster than markets were expecting," Truss said.

"We need to act now to reassure the markets of our fiscal discipline," she added.

Chief finance minister Kwarteng's pledges to carry on cutting income and corporation tax have rattled markets in recent weeks, with yields on gilts – UK government bonds – soaring.

10-year gilt yields jumped 1.9 basis points Friday as markets digested Kwarteng's departure and Truss's statement. The British pound slumped 1.34% against the dollar to trade at $1.1179, having rallied Thursday as markets started anticipating a policy U-turn.

The pound is down more than 17% against the dollar since the start of the year and plummeted to an all-time low of just $1.0350 last month when Kwarteng promised there was "more to come" regarding tax cuts.

"Kwarteng's removal as chancellor, making him one of the shortest holders of that office, hasn't done much to boost the pound, given that it has already rallied yesterday on hopes of a U-turn on the budget," IG Group's chief market analyst Chris Beauchamp said.

"Now the market will wait to see what is actually decided, and only then will it take a view on giving the government some support in terms of another bounce in the pound or a drop in gilt yields."

"Liz Truss certainly isn't out of the woods yet," he added.

Read more: Pound crashes to record low against the dollar as UK tax cut plans rattle investors