Friday’s mini budget from Chancellor Kwasi Kwarteng has sent UK borrowing costs soaring, sending shockwaves through financial markets and worry through investors. This has caused the pound to slump to its lowest against the US dollar in 37 years.
The pound tumbled by almost 2% Friday, after the Chancellor announced £45 billion in tax cuts. This meant the British Pound was trading close to $1.10 against the US dollar for the first time since 1985. Subsequently, the cost of borrowing for the UK government on international markets rose the most in a single day for over 10 years.
This comes after the Treasury said it would finance the tax cuts announced on Friday, as well as the energy price cap laid out by Prime Minister Liz Truss just days after she entered office. This will cost £72.4 billion more than planned for the current financial year in additional UK government debt sales.
This will now see the Treasury selling £234.1 billion of government bonds this financial year, instead of the planned £161.7 billion. Similarly, the Bank of England are reportedly planning to sell £80 billion of gilts.
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