Tue | Nov 29, 2022

British pound stabilises, but turmoil still roils UK economy

Published:Tuesday | September 27, 2022 | 10:35 AM
A woman walks past a headline posted on a wall in London, Tuesday, September 27, 2022. The British pound has stabilizsed in Asian trading after plunging to a record low, as the Bank of England and the British government try to soothe markets nervous about a volatile UK economy. The instability is having real-world impacts, with several British mortgage lenders withdrawing deals amid concern that interest rates may soon rise sharply. (AP Photo/Frank Augstein)

LONDON (AP) — The British pound stabilised Tuesday as United Kingdom authorities tried to ease investor concerns after the biggest tax cuts in 50 years sent the currency tumbling to a record low the previous day.

The turmoil is already having real-world effects, with several British mortgage lenders pulling offers from the market amid expectations the Bank of England will sharply boost interest rates to offset the inflationary impact of the pound's recent slide.

It was trading at around $1.08 on Tuesday, after plunging as low as $1.0373 early Monday. The British currency is still down 4% since Friday when Treasury chief Kwasi Kwarteng announced plans for 45 billion pounds ($49 billion) of unfunded tax cuts.

The pound has fallen 20% against the dollar this year.

Kwarteng's announcement, which comes at the same time the government plans to borrow billions to help shield homes and businesses from soaring energy prices, sparked concerns that the new government's policies would swell government debt and further fuel inflation.

Late Monday, the central bank said it was “closely monitoring” financial markets and was prepared to boost interest rates “as much as needed” to curb inflation, which is already running at 9.9%, the highest among major economies.

The bank's Monetary Policy Committee isn't scheduled to meet until November 3.

Follow The Gleaner on Twitter and Instagram @JamaicaGleaner and on Facebook @GleanerJamaica. Send us a message on WhatsApp at 1-876-499-0169 or email us at onlinefeedback@gleanerjm.com or editors@gleanerjm.com.