The pound is heading for its biggest six-month drop against the U.S. dollar since 2016, the year of the Brexit referendum.
The pound sterling had fallen 0.46% to $ 1.2127 in mid-Wednesday afternoon, its lowest level since June 16, when the Bank of England raised its key policy rate by 25 basis points. up to 1.25%.
The pound has fallen more than 10% against the dollar this year, its performance is affected by fears of a major economic slowdown, rising inflation and growing uncertainty about the consequences of Brexit.
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Also on Wednesday, Swati Dhingra, who will become responsible for Bank of England policy in August, said there is room for a gradual approach to raising interest rates.
The bank has raised interest rates five times since December, most by a quarter of a point each time, in an effort to fight inflation.
But inflation hit a 40-year high of 9.1% in May and some of the bank’s policymakers say rate hikes should have been bigger.
Ms Dhingra, an associate professor at the London School of Economics, will succeed one of these political leaders.
Speaking to a parliamentary committee examining his appointment, he said he could have supported a half-point increase at this month’s meeting, but now thought it would have been a mistake.
She said: “In retrospect, I think there may be room for a very gradual approach here.
“Newer data is starting to show that possibly a slowdown has become much more imminent than we thought before.”
City Index analyst Fawad Razaqzada told Reuters: “The pound continues to sell as concerns about a sharp economic slowdown outweigh the risks of rampant inflation.
“This has led to expectations that the BoE will increase charging rates, before stopping and potentially reversing rate increases.”
She said Ms Dhingra had “gone a step further by saying the central bank will have to tighten its belt very gradually forward”.
“The economy is starting to slow down”
Meanwhile, Bank of England Governor Andrew Bailey said it was “very clear” that the economy was starting to slow, adding that the bank would not necessarily have to act “vigorously” to control inflation. .
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He said at a European Central Bank event in Portugal: “There will be circumstances in which we will have to do more.
“We are not there yet for the next meeting.
“We still have a month left, but this is on the table.
“But you shouldn’t assume he’s the only one on the table, that’s the key point,” he added.