EPA
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News from the NOS•today, 20:09
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There are major concerns in the UK about the sharp drop in the pound exchange rate. Never before has the value of the British currency against the US dollar been as low as this morning.
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The decline followed the billions of dollars in tax cuts announced last Friday by the new government. As a result of this controversial package, which mainly benefits the wealthy, investor distrust of the struggling UK economy has further increased.
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Pound almost equal to the dollar
Since Friday, the value of the pound has fallen by more than 5 percent against the dollar. After an unprecedented low of $ 1.0373 per pound this morning, the British currency rose slightly to around $ 1.06 in the evening.
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A falling pound causes prices in the UK to rise further as imports become more expensive. Just like in the Netherlands, more and more Brits are struggling to make ends meet due to high food and energy prices.
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The central bank, Bank of England (BoE), says it is closely monitoring the crisis situation. The BoE “will not hesitate” to raise interest rates if necessary to curb inflation. Some British media speculated in advance that the central bank might intervene today, but that was not the case.
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Finance Minister Kwarteng says the £ 45 billion tax cut will lead to long-term economic growth. As soon as the economy grows due to the tax cut, the money will be recovered, is the reasoning of the new government led by Prime Minister Truss.
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But there are fears that the plan could exacerbate already high inflation. Critics fear that the pound will depreciate further, forcing the UK government to spend more interest money on government bonds.
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The depreciation of the pound sterling, but also of other currencies against the dollar, has been ongoing for some time. At the beginning of March, a pound was still worth $ 1.35, more than 30 cents more than it was early this morning.
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