LONDON: Sterling slid towards its lowest level this year ahead of an expected Bank of England (BoE) interest rate hike on Thursday as concerns about Britain’s economic prospects weighed.
The central bank is expected to raise interest rates by at least 25 basis points, with swaps markets implying chances are higher of an at least 50 basis points increase as the BoE tries to combat soaring inflation.
The move follows the US Federal Reserve’s 75 basis point hike on Wednesday, its biggest increase since 1994 as officials try to cut the supply of cheap money in order to combat rising prices in the world’s biggest economy.
Britain’s growth prospects are seen among the weakest for rich countries in 2023, and there is uncertainty over how fast the BoE can tighten policy this year to tame inflation without further hurting the economy.
Sterling has weakened around 11% against a robust dollar since the start of the year amid the grim outlook for the economy and political instability in Britain.
Data on Tuesday showed the UK jobless rate ticked higher in the first increase since late 2020.
The pound fell 0.88% against the dollar to $1.2070, near its lowest this year of $1.19340 reached on Tuesday.