Sterling gets a pounding

STERLING tumbled against the dollar last night as Britain’s gloomy economic outlook left investors on edge while soaring inflation in the US boosted the greenback.

The pound fell more than 1pc towards $1.23 after official figures showed inflation hit 8.6pc in the US in May – the highest level for more than 40 years.

It fuelled expectations the US Federal Reserve will raise interest rates far more aggressively than the UK – boosting the value of the dollar against the pound.

Sterling has also been hit by fears the economy will grind to a halt next year as it faces rising prices, interest rates and taxes – with some predicting the pound could slump to parity with the dollar and the euro.

Mark Dowding, chief investment officer at BlueBay Asset Management, said: ‘A stagflationary environment will be pretty dire for all UK assets and for the pound.

‘We could end up with a scenario where the pound is on its way to parity with both the euro and the dollar.’

■ PUBLIC satisfaction with the Bank of England has fallen to a record low as inflation soars.

Central bank figures showed just 25pc were happy with its performance while 28pc were dissatisfied.