Pound plunges as Bank of England warns emergency support will end on Friday


The pound has plunged again after governor of the Bank of England Andrew Bailey warned that its emergency support package for the markets would end on Friday.

Earlier on Tuesday the Bank intervened for the second time in as many days to prevent “fire sales” of pension fund assets, amid the continuing market turmoil in the wake of Chancellor Kwasi Kwarteng’s mini-budget.

The Bank has expanded its programme of daily bond purchases to also include inflation-linked debt.

It cited a “material risk” to British financial stability with “the prospect of self-reinforcing ‘fire sale’ dynamics”

But speaking in Washington, Mr Bailey warned there could be no further extension beyond the end of the week.

“My message to the [pension] funds involved – you’ve got three days left now. You have got to get this done.

“Part of the essence of a financial stability intervention is that it is clearly temporary.”

He continued: “We think the rebalancing must be done.”

Following Bailey’s remarks sterling fell more than a cent against the dollar to its lowest rate since September 29.

Pension funds have be fighting to raise cash since Mr Kwarteng sparked a bond rout on 23 September.

It came after his announcement of the government’s plans for £45 billion of unfunded tax cuts.

Pension funds with liability-driven investments (LDIs) suffered as the collateral pledged when investing in complex derivatives started to collapse.

Industry group the Pensions and Lifetime Savings Association told Reuters the Bank of England should think about continuing an emergency bond-buying scheme to stabilise the market for UK government debt at least until October 31 “and possibly beyond”.

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