The British pound has fallen to its lowest level in over a year, while UK borrowing costs reached their highest point in 16 years. Economists warn that rising borrowing costs could lead to tax hikes or spending cuts as the government strives to meet its fiscal rules of not borrowing for daily expenses.
Treasury Minister Darren Jones stated that no emergency intervention was needed in financial markets, while opposition critics accused the government of mishandling finances. On Thursday, the pound dropped by 0.9%, trading at $1.226 against the dollar.
The UK government’s borrowing costs have risen due to higher debt interest payments, potentially slowing economic growth. Mohamed El-Erian of Allianz warned that this could limit available tax revenue for public services. Weak economic data, including zero growth between July and September 2024, adds to the pressure.
