(AP) — The British pound stabilised Tuesday as United Kingdom authorities tried to ease investor concerns after the biggest tax cuts in 50 years sent the currency tumbling to a record low the previous day.
The turmoil is already having real-world effects, with several British mortgage lenders pulling offers from the market amid expectations the Bank of England will sharply boost interest rates to offset the inflationary impact of the pound’s recent slide.
It was trading at around $1.08 on Tuesday, after plunging as low as $1.0373 early Monday. The British currency is still down 4% since Friday when Treasury chief Kwasi Kwarteng announced plans for 45 billion pounds ($49 billion) of unfunded tax cuts.
The pound has fallen 20% against the dollar this year.
Kwarteng’s announcement, which comes at the same time the government plans to borrow billions to help shield homes and businesses from soaring energy prices, sparked concerns that the new government’s policies would swell government debt and further fuel inflation.
Late Monday, the central bank said it was “closely monitoring” financial markets and was prepared to boost interest rates “as much as needed” to curb inflation, which is already running at 9.9%, the highest among major economies.
The bank’s Monetary Policy Committee isn’t scheduled to meet until November 3.