“The pound is in an incredibly worrying situation” ; “The pound is in danger. » So many formulas used on Monday, September 26, by economists and investors to translate their anguish amid the fall of the British currency, after the announcement on Friday, September 23 of the costly government support plan for Liz Truss’s economy (over 100 billion pounds!). In fact, the pound fell almost 5% on Monday to trade below $1.06. In total, it has lost 20% of its value since the beginning of the year.
Inflation at its highest rate in 40 years
This fall is particularly hard on household finances. Specifically, with the price of oil fixed in dollars, a weak pound will lead to a more expensive tank of petrol. This is also the case for gas. All these increases will result in higher inflation, which is already at its highest rate for forty years and will reach 13% annually in October.
The UK government’s cost of borrowing also rose sharply on Monday, topping 3.8%, a level not seen since 2011. By comparison, in 2021 the rate had finished below 1%.
Critics swell at the confusing package. “tax cut plus stimulus” of the executive. The opposition punishes “failure » of the new government responding to the cost of living crisis “. “Without economic forecasts, without evaluation of the impact of large (fiscal) concessions on public indebtedness”, condemned, for his part, the former member of the Bank of England Andrew Sentence. “It is highly damaging to the UK’s reputation as a fiscally responsible nation. », he added.
The Bank of England, which promised on Monday night ” follow-up closely » evolution of the pound, was content to promise to act at your next meeting », in November. Meanwhile, the central bank has already announced that it will carry out a stress Test, if the banks will be able to withstand the blows to come…