New Delhi

The Bank of England has said that it “will not hesitate” to increase interest rates in order to meet the two per cent inflation target. The announcement came after the pound fell to a record low against the US dollar and the BoE said that they are currently scanning the financial markets "very closely".

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The pound fell sharply after British finance minister Kwasi Kwarteng announced major tax cuts in the mini budget. The currency lost almost five per cent to reach $1.0327 – the lowest since 1971.

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"The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets," Bank of England Governor Andrew Bailey said in the official statement.

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"The MPC will not hesitate to change interest rates as necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit," he added according to Reuters.

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The Bank of England raised the interest rates to 2.25 per cent from 1.75 per cent on Monday and experts believe that it can increase further in the coming days. Most banks around the world are following the same strategy with the US Federal Reserve increasing the rates to the highest in more than 14 years.

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While there has been quite a bit of public uproar, Kwarteng maintained that the government is concentrating on long term gains rather than short term goals. He also announced that the medium-term budget will be published on November 23 by the Office for Budget Responsibility.