Rolling coverage of the latest economic and financial news, as sterling slumps to a record low against the US dollar
Pound hits all-time low against dollar after mini-budget rocks markets
We’ve now reached the point where the Bank of England needs to step in in order to regain the initiative, warns Paul Dales of Capital Economics.
Dales says governor Andrew Bailey has two options.
That could involve something like a 100bps or 150bps hike in interest rates (to 3.25%/3.75%), perhaps as soon as this morning.
By bringing forward a lot of the policy tightening that might needed to have happened anyway, the Bank would demonstrate in no uncertain terms that whatever the government does it will ensure that inflation returns to 2%. This would go a long way to easing the crisis.
“The bank, and indeed the Government, have indicated that they are going to take their next decision in November and publish forecasts and, so on that point, the worry is that they may have to take action a bit sooner than that.”
