Sterling weakens against dollar as new forecasts show recession lasting into 2024
Governor of the Bank of England Andrew Bailey addresses the media in London, Britain, November 3 2022. Picture: TOBY MELVILLE/REUTERS
The pound fell sharply and was down about 2% against the dollar on Thursday, touching its lowest since mid-October when Britain was in a political crisis triggered by former prime minister Liz Truss’s tax-cutting plans. Unemployment would rise steadily to 6.4% by late 2025, nearly doubling from 3.5% now, its lowest rate since the mid-1970s.
The majority of the nine-member monetary policy committee said rates would need to rise higher still, although probably not as high as the 5.2% that was priced into financial markets when the BoE finalised its forecasts. “The committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary,” the MPC added, echoing its previous guidance.Central banks across the Western world are responding to similar challenges. Inflation has rocketed over the past year due to residual labour shortages and supply-chain bottlenecks since the Covid-19 pandemic and, in Europe’s case, a big increase in energy bills since Russia invaded Ukraine in February.
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