British interest rates soar – “nightmare”

The British long-term interest rates are at the highest levels since 2018. At the same time, the pound has fallen to its lowest level against the dollar in 14 months.

» Published: January 09 2025

British interest rates soar – “nightmare”
Photo: Alberto Pezzali AP/TT

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According to economics professor Martin Weale, the situation is reminiscent of the "nightmare" that unfolded in the 1970s. Then, the UK found itself in a deep debt crisis and was forced to ask the International Monetary Fund for help.

We have not actually seen a combination as toxic as this, with the pound plummeting sharply while long-term interest rates rise, since 1976, he tells Bloomberg.

He adds that the situation is not quite as serious yet, but it is likely something that Finance Minister Rachel Reeves is now dreading will happen.

Analysts are worried that investors will now lose faith in the British government's ability to keep national debt in check and inflation under control.

The increasing borrowing costs also risk erasing the finance minister's budget leeway and may force the government to take a range of austerity measures.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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