British pound slumps despite Bank of England intervention in bond market
Currency down 1.6% against greenback following announcement of government's tax-cutting new budget
A general view of Bank of England as the Bank of England poised to make the biggest hike in interest rates for 27 years in an attempt to curb inflation on August 03, 2022, in London, United Kingdom. ( Rasid Necati Aslim - Anadolu Agency )
ANKARA
The British pound on Wednesday continued to plummet against the dollar, falling 1.6% to $1.0538 despite Bank of England intervention in the bond market amid market turmoil.
The British pound on Monday hit an all-time low against the US dollar, falling as much as 4.7% to $1.035 after Chancellor of the Exchequer Kwasi Kwarteng vowed more tax cuts.
Last week, the new government led by Prime Minister Liz Truss announced a plan to bolster growth, including through tax cuts and the cancellation of a planned corporate tax rate hike to 25%. In total, it is estimated that the plan will cost £45 billion (over $48.2 billion) through 2026-27.
In a cautionary statement on the government's newly unveiled mini-budget, global rating agency Moody's warned the large and unfunded tax cuts in it could lead to higher deficits amid rising borrowing costs and a weaker growth outlook.
The International Monetary Fund also warned the UK about the new mini-budget, saying the nature of current fiscal measures will "likely increase inequality."
Over the last four weeks, the GBP/USD level has dropped 9.59%.
Analysts said the recent falls in the currency reflected not just the broad strength in the dollar, but worries over the UK economy.
