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

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The pound fell again after Bank of England Governor Andrew Bailey warned that his emergency market support package would end on Friday.

Earlier Tuesday, the Bank intervened for the second time in days to avert a “flash sell-off” of pension fund assets amid continued market turmoil following Chancellor Kwasi Kwarteng’s mini-budget.

The Bank expanded its daily bond buying program to include inflation-linked debt.

He mentioned a “material risk” to the UK’s financial stability, with “the prospect of a self-reinforcing ‘flash sell’ dynamic”.

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

“My appeal to [pension] funds are involved – you have three days left. You must do it.

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

He continued: “We think a balancing act needs to be done.”

After Bailey’s statement, the pound fell more than a cent against the dollar to its lowest level since September 29.

Pension funds are scrambling to raise cash as Mr. Kwarteng sparked a bond bankruptcy on Sept. 23.

This came after he announced the government’s plans for an unfunded £45bn tax cut.

Liability-driven investment (LDI) pension funds have been hit as collateral pledged when investing in complex derivatives has begun to crumble.

This was reported by the industry group Association of pensions and life savings. Reuters The Bank of England should consider continuing the emergency bond buying scheme to stabilize the UK government debt market until at least 31 October “and possibly longer”.

Credit: www.independent.co.uk /

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