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    Home » British Pound hits low as Government Borrowing Costs surge
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    British Pound hits low as Government Borrowing Costs surge

    Economists have warned that these rising borrowing costs could force the government to raise taxes or reduce spending to meet its self-imposed borrowing target.
    News DeskBy News DeskJanuary 9, 2025
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    British Pound hits low as Government Borrowing Costs surge_Image Via_Pixabay
    Image Via: Pixabay | Cropped by BH

    London: The British pound has fallen to its lowest level in nine months, following a rise in UK government borrowing costs.

    UK 10-year borrowing costs surged to their highest level since the 2008 financial crisis, when bank borrowing nearly came to a halt, leading to fears of further tax increases or cuts in government spending.

    Economists have warned that these rising borrowing costs could force the government to raise taxes or reduce spending to meet its self-imposed borrowing target.

    A Treasury spokesperson emphasized that meeting fiscal rules is “non-negotiable” and that the government will maintain strict control over public finances.

    The chancellor Rachel Reeves is determined to drive economic growth and support working people, while also focusing on stability in the public finances as a precursor to economic stability and growth.

    British Pound hits low as Government Borrowing Costs surge_Image Via_X_Rachel Reeves
    Image Via: X@Rachel Reeves | Cropped by BH

    The government’s borrowing methods, including the sale of bonds, have become increasingly costly as borrowing rates rise. Earlier this week, the cost of borrowing over 30 years hit its highest level in 27 years.

    Meanwhile, the pound dropped by as much as 1.1%, reaching $1.233 against the dollar, its lowest level since April last year.

    The increase in borrowing costs is part of a global trend, with concerns about inflation and rising debt affecting government borrowing rates worldwide. In the US, 10-year government bond yields also surged, driven by investor concerns about policies under President-elect Donald Trump and growing inflation.

    The Office for Budget Responsibility (OBR) will update its government borrowing forecast in March, with the government continuing to prioritize fiscal stability as essential for economic growth.

    However, opposition shadow chancellor Mel Stride criticized the government’s borrowing plans, claiming they make it more expensive to borrow, and argued that the focus should be on building a more resilient economy rather than raising taxes.

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