BRITISH POUND SLUMPS TO 40-YEAR LOW AGAINST THE DOLLAR

The pound sterling sank to its lowest value against the dollar since 1985 as markets brace for a borrowing spree by new prime minister Liz Truss to fund a rescue plan for homes and businesses crushed by soaring energy costs.

The pound fell as low as $1.14 to the buck on 7 September, but has since struggled back to $1.17 as of 12 September.

The pound has surrendered about 15 percent of its value so far this year.

Next month, the British government is scheduled to raise the limit it places on utility costs for homes and businesses. The cap will rise by about 80 percent, regulators have announced.

The typical British household then will pay an estimated £3,549 annually for electricity and natural gas.

Truss has asked for a massive aid plan that would cap household energy bills at £2,500, which would cost the government anywhere from £90 billion to as much as £200 billion over the next two years, according to various estimates.

A similar plan for businesses would cost about £60 billion, the Financial Times said.

Truss has vowed not to impose a windfall tax on energy companies to pay for the aid and instead will borrow to cover the cost.

TREND FORECAST: That new debt load will come at a time when inflation in the U.K. is running above 10 percent and the Bank of England is in the midst of a campaign to raise interest rates, as we reported in “Bank of England Raises Rate to Its Highest in 14 Years” (9 Aug 2022).

We forecast the U.K. will fall deep into recession… with no clear exit from it for years to come.