The pound’s plunge to a record low against the US dollar has sparked speculation that the Bank of England may be forced to hike interest rates in an emergency move to stem the run on sterling (PA)
(Picture: PA Wire)Early on Monday the pound dropped to its lowest level against the dollar since 1971.
Sterling fell to just 1.03 dollars in early Asia trade, before regaining some ground through the day to north of 1.08 dollars.
This latest drop, follows another fall last week, thought to be in response to Chancellor Kwasi Kwarteng’s mini-budget announcement on Friday, which featured the biggest round of tax cuts for 50 years.
It’s thought this drop was caused by further comments the Chancellor made over the weekend suggesting yet more tax cuts were on the agenda.
The fall has led to politicians and experts warning that it could cause interest rates to rise, as gas and petrol, which are prices against the dollar, are likely to go up.
And it’s thought the Bank of England may have to take action to try to give the pound a boost, which would involve hiking interest rates even further.
The Evening Standard’s Political Editor Nicholas Cecil explains what the drop in Sterling means for the UK, how politicians may react, and discusses reports that hedge fund bosses made ‘small fortunes’ by betting that Sterling would fall.
And Matthew Lesh, the Head of Public Policy at the Institute of Economic Affairs explains why he’s not “freaking out” about the pound, and how the fall could benefit exporters.
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