New collapse of the pound plunged to a new all-time low against the dollar at $ 1.0327, with a drop of almost 5%, before rising slightly to the 1.05 area. The pound had already plunged 3.6% on Friday following the launch of the UK mini-budget by the new finance minister Kwasi Kwarteng. The mini-budget includes historic tax cuts funded by an increase in debt issuance not seen since 1972. UK Debt Management Bureau has increased planned bond sales for fiscal year 2022-23 of 62.4 billion pounds to 193.9 billion.
Speaking to the House of Commons, Finance Minister Kwasi Kwarteng said the government wants “a new approach to a new era focused on growth” and is targeting an economic growth rate of 2.5% in the medium term. “We believe that high taxation reduces incentives to work, discourages investment and hinders business,” continued Kwarteng. But the tax reform was quickly branded as a save-the-rich reform and promptly fueled fears about the UK debt trend, resulting in a plunge in sterling and a boom in UK government bond yields.