Bank of England monitoring markets ‘very closely’ after pound falls

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Analysts expect the Bank of England may need to raise rates more aggressively after Monday morning’s market turbulence.

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LONDON – The Bank of England said on Monday it was monitoring financial market developments “very closely” after a dramatic morning of turmoil saw the British pound plunge to an all-time low against the US dollar.

The pound fell by a staggering 4.8% to below $1.04 in the early hours of Monday morning, pushing losses higher than late last week when Chancellor of the Exchequer Kwasi Kwarteng announced the so-called ‘mini-budget’ of the new British government. outlined.

The British currency was able to recoup some of its losses during the session, but extended its decline against the dollar immediately after the Bank of England statement.

Sterling last traded 1.3% lower at 1.0713.

“The Bank is following developments in financial markets very closely in light of the significant price overhaul of financial assets,” Bank of England Governor Andrew Bailey said in a statement.

“The role of monetary policy is to ensure that demand does not exceed supply in a way that leads to more inflation in the medium term,” Bailey said.

The BOE governor said the central bank’s monetary policy committee would make a “full assessment” at its next scheduled meeting in November, “and act accordingly.”

“The MPC will not hesitate to change interest rates if necessary to bring inflation back to its target of 2% sustainably over the medium term, in line with its mandate,” he added.

The announcement by Prime Minister Liz Truss’s government included a series of tax cuts not seen in Britain since 1972 and an unabashed return to the ‘trickle-down economy’ promoted by the likes of Ronald Reagan and Margaret Thatcher.

The radical policy moves put the UK at odds with most major global economies at a time of skyrocketing inflation and a worsening cost of living crisis.

Tax plan

The UK Treasury Department said Monday afternoon that the government would outline its medium-term budget plan on November 23.

Kwarteng requested the independent Office for Budget Responsibility to prepare a full forecast alongside the plan, according to the Treasury.

Friday’s mini-budget was admittedly not accompanied by the usual economic forecasts of the OBR.

“The fiscal plan will provide further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP over the medium term,” the Treasury said in a statement.

The government also plans to work out supply-side growth reforms starting next month, she added.

— Elliot Smith of CNBC contributed to this report.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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