Sterling Falls After Chancellor Announces New Growth Plan

It's been all over the newspaper front pages this week that since Kwasi Kwarteng's mini-Budget last week, the pound has plummeted to a record low against the dollar ...

The Government under Prime Minister Liz Truss is trying a form of trickle-down economics in an attempt to boost growth in the economy. Her belief is that the trickle-up policies we've had since the Covid outbreak is, in fact, stagnating growth rather than boosting it.

"It's a radical shift in economic policy and it's spooked the markets!"

It seems that the Treasury was quite surprised when all this was announced last Friday and they hadn't even gotten around to producing forecasts which left economists shaking their heads. No wonder the pound has slipped dramatically.

The Bank of England (BoE) and the Treasury have both tried to settle everything down in the past few days with promises of proper forecasts from the Office of Budget Responsibility (OBR) in November, and assurances that the BoE is on top of things.

But this didn't help initially as Sterling dropped 2% an hour after the BoE and Treasury announcements and now banks are pushing up their mortgage interest in an attempt to cover themselves from future BoE base rate rises.

"At the time of publication of this blog post, Sterling is as low as $1.08!"

It may go lower ... and this is where Conservative MPs are beginning to freak out. Many have said they will support Liz Truss and Kwasi Kwarteng until Sterling falls below $1 and others have already put in votes of no confidence in Liz Truss' premiership to Sir Graham Brady.

The Chancellor will set out his Medium-Term Fiscal Plan on the 23rd of November, which is designed to calm the markets, but is still many weeks away. This announcement will include full forecasts from the OBR and new fiscal rules to ensure that debt falls as a share of GDP in the medium to long term.

The Government has said there will be further growth measures rolled out next month including changes to planning, business regulations, immigration, agriculture and digital infrastructure!

This really is a massive economic change of direction for the country. Where countries like Germany are expecting a 2% shrink in the economy leading to a recession, our Government is betting on 2% growth with this new economic direction.

I'll keep you informed as I hear more.

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