The pound has crashed to a record low against the dollar, setting a new low water mark just days after the new UK government announced their economic plan.
It’s fair to say that it hasn’t been a great start to the ‘economic growth’ plan set out by Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng.
Sterling plummeted down to $1.03 earlier on Monday, before recovering slightly to sit at $1.08.
This is just the start for the new Conservative government too, who have removed the cap on bonuses for bankers, cut taxes for high earners, cancelled some proposed measures from their party predecessors, and promised further tax cuts.
That left the markets reacting as they did earlier today, with UK government borrowing on the increase as well as some speculation about an emergency interest rate rise.
Furthermore, there has been additional speculation that the Bank of England might have to conduct an emergency meeting later this week to raise the interest rates, not only to stop the fall of the pound, but all to attempt to mitigate against high inflation.
For context, it has only been under a week since the Bank of England raises interest rates by half a point to 2.25 percent.
Now, some are predicting that interest rates could reach 5.5 percent by early next year.
Rates are already at the highest that they’ve been for 14 years, having increased steadily every time for the past seven times.
So far, the government has not commented on the fall of the pound.
Speaking to BBC News, former Bank of England Deputy Governor John Gieve said that the BoE could raise rates before their next scheduled meeting in November, though they would be reluctant.
He said: "I'm sure they very much don't want to do that... because that is a sign of pressure.
"Emergency meetings are avoided if at all possible and I am sure they will try to avoid it."
However, another former member of the rate-setting committee Sushil Wadhwani warned: "I would be tempted to announce an extra meeting in a week.
"The argument for waiting a week would be to give them time to properly assess the extra news.
“The reason for not waiting until November is that they are cognisant of the need to respond in a timely basis to the new developments.
"Of course, the Bank of England taking action is a second-best solution.
“The first would involve the chancellor coming up with a credible fiscal plan which is blessed by the Office for Budget Responsibility."
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