The Bank of England governor, Andrew Bailey, has hinted at the possibility of the Bank becoming more aggressive in cutting interest rates if inflation remains low. This comment has caused the pound to drop to a two-week low against the dollar. Bailey mentioned that the Bank might take a more activist approach to cutting rates, which is in contrast to its cautious stance in the past. The pound has lost its gains against the dollar over the last two weeks following Bailey’s comments. Investors are now more confident that the Bank will cut borrowing costs, with a 88% chance of a rate cut to 4.75% in November. Bailey also expressed concerns about geopolitical issues in the Middle East and their impact on oil prices. The pound’s drop has also been attributed to external factors such as safe-haven flows and a strengthening dollar. Analysts suggest that the pound may have further to fall against the dollar, especially if tensions in the Middle East escalate. Overall, Bailey’s comments have had a significant impact on the currency and government bond markets, with investors expecting deeper rate cuts in the future.
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