Sterling dropped as low as $1.1077 around midday on Friday against the greenback after the announcement from the new British government led by Liz Truss of an extensive tax cuts to boost the economy.
Liz Truss’ government will cancel its plan to raise corporate tax to 25% as well as reverse a recent rise in income tax and cut taxes for businesses in designated investment zones to boost the country’s battered economic growth.
The decision came after the Bank of England on Thursday said the U.K. was likely already in a recession as the third quarter GDP is forecast to contract.
The Bank of England approved to raise its benchmark interest rate by 50 basis points on Thursday.
The base rate was raised to 2.25% from 1.75% after inflation in the United Kingdom slightly dipped to 9.9% in August, but remained well above the central bank’s target of 2%. Despite being pressured by rising energy and food prices, core inflation, which excludes the aforementioned categories, was still 6.3% on an annual basis in August.
