The pound slumped, losses to about 10%

2022.06.29 23:36

The pound slumped, losses to about 10%

Budrigannews – The pound slumped Wednesday, putting it on course for its biggest six-month loss against the dollar after Bank of England governor Andrew Bailey said the U.K economy was at a turning point and starting to slow at a time when red-hot inflation is expected to continue.

GBP/USD fell 0.5% to $1.2119, taking losses to about 10% year to date.

The U.K. economy is at “something of a turning point…it is very clear that it is starting to slow,” Bailey said on Wednesday.

Despite the slowing growth, the BoE chief said the bank remained committed to bringing down inflation following recent data that suggests price pressures are unlikely to ease in the short term.

The pace of inflation remained at more than 40-year highs data last week showed, but even more of a worry for the central bank were signs that the drivers of inflation are broadening out, increasing the risk of prolonged above-target inflation.

In the recent inflation data there “was a sign that we saw a shift in the makeup of inflation from the goods supply shock to the energy and food shock, which I would sort of characterize as the post Covid supply-chain shock,” Bailey added.

This post-Covid inflation run, which will be watched “very carefully,” Bailey said, could push the central bank to deliver steeper rate hikes and roll out other policy tools to curb inflation.

“There will be circumstances in which we will have to do more,” Bailey said, adding that the prospect of the BoE hiking rates by a more than expected 50 basis points at the next meeting in July was “on the table.”