The pound sterling fell to a record low in early Asia trading on Monday against the US dollar, stooping to $1.03 before a slight rise to around $1.06 on Monday morning, BST.
A pound slumping in value will have a knock-on effect for businesses, with imports that are priced in US dollars becoming more expensive, including those of oil and gas. This development could also exacerbate current inflationary pressures.
The pound is not the only currency faltering against the dollar, with the Euro also hitting a 20-year low against it.
After chancellor Kwasi Kwarteng announced a wave of tax cuts in last week’s mini-Budget, he said over the weekend that more tax reductions could be forthcoming.
The prospect of further tax cuts and more borrowing has concerned economists, who have suggested that the Bank of England could look to raise the cost of borrowing further by hiking interest rates again.
Last week, the Bank raised interest rates to 2.25 per cent in a bid to temper inflation, which stands at 9.9 per cent.
What is now seven consecutive months of interest rate increases has seen monthly mortgage repayments for millions of homeowners in the UK rise.
But some analysts have predicted more pain before the situation eases, suggesting that interest rates could even reach as high as 5.5 per cent by the Spring of 2023.
Labour shadow chancellor Rachel Reeves called the pound sterling’s tumbling value “incredibly concerning” and urged the chancellor to come forward with his plans to “get a grip on the public finance” and address traders’ and working peoples’ worries.
Photo by Sarah Agnew on Unsplash
