Andrew Bailey warns of massive downturn as pound suffers biggest fall in two years

The pound suffered its steepest fall since the onset of the Covid crisis on Thursday as traders panicked after the Bank of England warned over a recession. Sterling fell as much as 2.2pc against the dollar to a near-two year low of $1.23 as analysts warned that a “toxic mix” of high inflation and stalling growth threatens to push the currency even lower. Derek Halpenny, an analyst at MUFG, said the “toxic mix” of double-digit inflation and a predicted plunge in GDP “will continue to act as a big incentive to sell the pound”. He said: “While those projections have clearly spooked the markets and prompted heavy pound selling, the forecasts still imply the need for further tightening.” Bank of America economist Robert Wood said sterling was “battered” following the rate increase and will face more pressure in coming months. It does appear there have been increased LNG flows into the UK and that has eased the supply-demand imbalance in the UK market.” Mr Bailey also urged bosses making decisions on executive pay to bear in mind that times are “very very difficult for lower-income households.” “I just think it is important to bear that in mind, when thinking about this, because there is otherwise a broader distributional outcome,” he said.