Pound slides as Chancellor receives growth setback
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The pound fell yesterday as official figures showed a surprise growth setback for Chancellor Rachel Reeves that raised fears of a downturn. Sterling slipped half a cent against the dollar to just above $1.26, a two-week low, after the Office for National Statistics (ONS) said gross domestic product (GDP) shrank by 0.1 per cent in October.
Sterling was down by more than half a cent against the euro at just over €1.20. The decline in monthly GDP was the second in succession and the first time it has dropped for two months in a row since the pandemic era in 2020. It added to the risk that the economy could shrink in the current fourth quarter of the year, economists said.
And with inflation expected to head higher over the coming months, fears were raised that Britain could be heading for so-called 'stagflation' – where the economy is stagnating while prices are spiralling. The latest GDP figures mean that the economy has only grown in one out of the first four months since Labour took office – and that GDP is 0.1 per cent smaller than when Reeves and Sir Keir Starmer entered Downing Street.
Struggle: The latest GDP figures mean that the economy has only grown in one out of the first four months since Rachel Reeves and Sir Keir Starmer entered Downing Street. Yet hopes that the economy's weakness might persuade the Bank of England to deliver a pre-Christmas interest rate cut at its final policy meeting next week remain unlikely to be fulfilled. Market expectations of a cut next Thursday edged up only marginally from around 10 per cent to 13 per cent.
