The pound sterling unscrews. The British currency plunged overnight to find itself at 1,0350 dollar, be his historic low.
This free fall follows the tax cuts and other budgetary measures announced Friday by London, the investors fearing a slippage in public spending in a country that seems to be sinking into recession.
On Friday, the new finance minister Kwasi Kwarteng had announceda series of support measures to British households facing inflation close to 10%. Main measures: a freeze on energy bills and tax cuts.
Economists assess the entire tax package between 100 and 200 billion pounds, which should force the United Kingdom to borrow more than 70 billion additional pounds on the markets. Colossal amounts that worry operators.
Kwasi Kwarteng relativized on Sunday the very negative reaction of the market to its “mini-budget” and accusations of favoring the better-off, stating that his package of measures “helps people across the income scale”. Asked about the fall of the pound and the increase in borrowing rates, the Minister contented himself with replying that the United Kingdom should have “a more proactive approach to growth“.
Rachel Reeves, spokesperson for the partylabor opposition on financial matters, said “terribly worried” from the plunge of the pound.
“Markets are asking: Who’s going to fund all this spending? UK ten-year debt lending rates have jumped 20% since last week”adds analyst Ipek Ozkardeskaya.
On Thursday, the monetary policy committee of the bank of england had raised its interest rate by 0.50 percentage points to 2.25%, in an attempt to counter inflation at 9.9%, the highest rate in the G7. The monetary institute also estimated that the UK had entered a recession during the third quarter.