The low point not seen since the Margaret Thatcher era was partly driven by the strong dollar, Bank of England Governor Andrew Bailey noted this morning. But Britain’s dim economic outlook played a big role. The bank has warned that soaring energy prices will soon trigger a recession that will last until the end of 2023, a year when Britain was already forecast to have the weakest growth in the G7. “Markets seem to be relishing the opportunity to hit the British pound,” said Valentin Marinov, chief currency researcher at Credit Agricole. The pound fell as much as 1 percent to $1.1403 on Wednesday afternoon as the dollar continued its recent strong run, hitting a 24-year high against the Japanese yen and nearing a 20-year high against the euro. Financial markets have been shaken by Ms. Trass’ economic plans. Her promised tax cuts combined with an expected 100 billion pounds to cover energy bills have prompted investors to dump the pound and government bonds in recent weeks. New Chancellor Kwasi Kwarteng told a meeting with bank bosses that he would pursue an “unashamedly pro-growth agenda”. Economists doubt the prime minister’s tax cut plan will boost growth. Dr George Dibb, of the Institute for Policy Research, said: “Liz Truss is right to have bold ambitions to grow the economy, but all signs point to her falling back on failed policies of tax cuts and deregulation. “More than a decade of corporate tax cuts have failed to deliver on their promise to boost investment. Any income tax cuts at this time are likely to be offset by a further rate hike by the Bank of England.” Huw pill at Finance Committee on Wednesday (Parliament TV) Huw Pill, the bank’s chief economist, told the Commons Treasury Select Committee on Wednesday that Mrs Truss’s plan to freeze energy bills would likely force another rate rise, despite stopping inflation from peaking 13.3% of fall forecasts. Appearing before MPs with Mr Bailey and two other members of the Bank’s Monetary Policy Committee, Mr Peel said a rate decision would not reflect a fall in inflation in the coming weeks. “That very short-term impact on inflation may not be the most important thing from a monetary policy point of view. From a monetary policy point of view, this is the result of the package of measures… on inflation over longer horizons,” he said. The four bank officials blamed Russia for curbing gas exports to Europe for the UK’s current financial woes. “I’m afraid we can’t control what Vladimir Putin does, Mr Bailey said. Economists have warned that the Eurozone is also facing recession, shaking stock markets across the continent. The FTSE 100 slipped 0.6 percent while France’s CAC 40 and Germany’s DAX fell 0.4 percent each.
