British Pound Falls to a Record Low Against the US Dollar

Following the announcement of the biggest tax cuts in the UK in the last 50 years, the British pound fell to record lows against the US dollar.

Upon the developments, the Bank of England recorded the message that it would not hesitate to raise interest rates. In the statement, it was also noted that the movements in the markets were closely monitored. The Bank underlined that there will not be an emergency meeting and that the interest rate decision will be made at the meeting to be held in November. Another important news of the day was that some large groups stopped offering mortgage products. Halifax, the largest in this field in the UK, pointed to the volatility in the market as the reason for the decision. While 1 pound sterling approached the level of 1.03 dollars in Asian stock markets, it only rose to the level of 1.07 dollars after the Central Bank's statement. UK Finance Minister Kwasi Kwarteng said on Friday that there would be tax cuts as well as a £45 billion package. The British government announced the biggest tax cut package in a generation. The British pound has been under pressure against the dollar's resistance for some time. In Asian stock markets, the euro also fell to its lowest level in 20 years against the dollar. Investors' inability to see the end of the war in Ukraine, the energy crisis, and the anxiety caused by the approaching winter have played a major role in this. If sterling stays at this level against the dollar, imports of commodities such as oil and natural gas, which are traded in dollars, will become much more expensive for the UK. Prices of other products imported from the US will also rise significantly. In a statement made by UK Finance Minister Kwasi Kwarteng, it was noted that the tax system in the UK will undergo a radical change. Within the framework of these plans, which he called a "new era" for the economy, cuts in income tax and stamp tax on house sales were announced, while tax increases expected to be brought to companies were stepped back. While Kwarteng argued that a change of direction was needed to trigger economic growth, the opposition Labor Party said that Kwarteng's plans would not bring a solution to the problem of the cost of living in the UK and that these plans would reward those who were already rich. Peter Escho of investment firm Wealthi said: "All currencies are being sold against the US dollar, which puts the dollar in a stronger position. But sterling's position has also been driven by concerns that the new government's tax cuts will push up inflation. Add to this energy subsidies and the news that the Bank of England will have to hold an extraordinary meeting to raise interest rates and there is a complete panic atmosphere." Some investors predict that the Bank of England may have to step in to prevent the depreciation of the pound. Stephen Innes of SPI Asset Management also made the following statements: "In order to stop the bleeding, however temporarily, the Bank of England may be tempted to 'do whatever it takes' to reduce inflation." "An extraordinary meeting could be called this week to raise interest rates to restore market confidence. It could even be held today." https://twitter.com/ProfDemirtas/status/1574483231579291649 Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!