Pound plummets against dollar after huge interest rate hike

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The pound has plunged against the US dollar after the Bank of England rate hiked interest rates to its highest level in 14 years. Sterling slumped immediately after the announcement, which has seen interest rates jump by 0.5 percent from 2.25 percent from 1.75 percent. The British currency had risen to just below $1.15 minutes news of the interest hike was announced. But it quickly nosedived to as low as $1.1443 before recovering slightly to $1.1457. 

On Wednesday, the pound had already plunged to its lowest since 1985 against the US dollar after a decision from the Federal Reserve to raise its key rate by three quarters of a percentage point.

After the interest rate hike today, the Bank of England said it would continue to “respond forcefully, as necessary” to inflation, despite the economy entering recession.

The central bank has forecast a slight 0.1 percent fall in the UK during the current third quarter.

This is partly due to the extra public holiday for Queen Elizabeth’s funeral – which, combined with a fall in output in the second quarter, meets the definition of a technical recession.

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