The Bank of England said yesterday that it “will not hesitate” to raise interest rates to halt the plunging value of the pound.
Sterling at one point fell to a record low against the dollar before regaining some ground amid continuing market turmoil after Kwasi Kwarteng announced more than £45billion worth of tax cuts.
Andrew Bailey, governor of the Bank of England, and the Treasury issued apparently co-ordinated statements in an attempt to calm the markets and shore up the pound.
The next interest-rate decision is scheduled for November 3, with economists forecasting that rates will rise from 2.25% at present to as much as 6% next year.
Bailey ruled out an emergency rate rise yesterday but said that he “will not hesitate to change interest rates by as much as needed” to bring inflation under control.
'Gamble'
Meanwhile, Sir Stuart Rose, chairman of Asda and former chief executive of Marks and Spencer, has told the BBC the government is gambling with the UK's economic future, likening the government's mini-budget to a bet on a horse race.
"They have put the entire UK economy on the 3:30 at Epsom," he said. "If it comes in people will cheer but if it doesn't people will be in a very difficult position indeed."
He cast doubt on the UK economy's ability to grow, as he pointed to Asda's closely followed income tracker which shows that the poorest 20% of households are already spending £60 more than they are earning every month.
"That household budget deficit means people are having to rein in spending and move away from premium brands."