The British pound is at its lowest level in 37 years.. Historic tax cuts in Britain

Sterling fell to its lowest level in 37 years against the dollar on Friday, as new British finance minister Kwasi Quarting announced historic tax cuts and huge increases in borrowing.

The British pound fell 0.6% to $1.1170, its lowest level since 1985, before continuing the series of declines.

The strength of the dollar affected the performance of all major currencies over the past months.

The British economy is suffering under the weight of the economic slowdown and rising inflation in addition to the strength of the dollar, which led to the decline of the pound sterling.

On Friday, Britain's new finance minister unleashed historic tax cuts and massive increases in borrowing, in an economic agenda that surprised financial markets, with the free fall of British government bonds.

These measures come just a day after the Bank of England raised interest rates to 2.25% and warned that inflation could reach 11% this year.

Ramifications

Quarting scrapped the country's highest income tax rate and also set for the first time the cost of Prime Minister Liz Terrace's spending plans, who wants to double Britain's economic growth rate.

Investors have been selling short-term government bonds as quickly as possible, with two-year bonds poised to post their biggest one-day decline since at least 2009, as Britain increased the value of debt issuance plans for the current fiscal year by 72.4 billion pounds ($81 billion).

Quarting said the home energy bill support announced by Terrace would cost 60 billion pounds for the next six months, and he said the tax cuts would cost another 45 billion pounds.

"Our plan is to expand the supply side of the economy through tax incentives and reform," the minister continued. "This is how we will successfully compete with dynamic economies around the world. This is how we will turn a vicious circle of stagnation into a benevolent growth cycle."

criticism

The opposition Labor Party called the plans a "desperate gamble", while the Institute for Fiscal Studies said the tax cuts were the largest since the 1972 budget.

It is difficult for market conditions to be more adverse for Quarting, as the pound sterling has performed worse against the dollar than almost any other major currency.

Much of the pound's drop is a reflection of the Fed's rapid rate hike to tame inflation that has turbulent markets, but some investors are also concerned that Terrace is willing to borrow heavily to fund growth.