Pound plummets after Bank of England chief hints at rate cuts
The British pound sterling fell by more than 1% to a three-week low following statements by Andrew Bailey about a possible more aggressive reduction in interest rates.
Photo: Oesterreichische Nationalb, CC BY-ND 2.0
The pound sterling fell more than 1% on Thursday, reaching a three-week low, after an interview with Bank of England Governor Andrew Bailey in The Guardian, reports "Interfax-Ukraine".
Bailey stated that the central bank could act "more aggressively" in cutting interest rates if positive inflation trends continue.
He noted that the UK's economy has shown greater resilience than expected a year or two ago.
"The economy has weathered the shocks of the last five years better than we anticipated. This gives us a basis for further development," said Bailey.
The Bank of England chief emphasized the importance of infrastructure investments and identified three main structural problems facing the country: an aging population, the need to increase defense spending, and combating climate change.
Andrew Bailey, who took over the central bank in March 2020, expressed hope that the second half of his eight-year term would be calmer after a period of "crisis management."
Following his statements, the pound is trading at $1.3114 compared to $1.3266 at the previous close. Against the euro, the exchange rate fell to 0.8417 pounds from 0.8326 on Wednesday.
Interest rate futures now reflect a probability of a 25 basis point cut at the next Bank of England meeting. The chance of a similar reduction in December is estimated at 40%.
Last month, the central bank kept the rate unchanged at 5% after a reduction of 25 basis points in August.