Rates fears as pound wobbles

The prospect of an old-fashioned rise in base rates, to protect sterling rather than to cool demand in the domestic economy, came a step nearer yesterday as the pound slipped back to DM2.3784 and $1.5530, down 1.25 pfennigs and half-a-cent on the overnight closing levels in London.

The pound is within a pfennig of its most recent low against the mark last August and barely five pfennigs above the all-time low in February 1993 after the pound was devalued, and some traders claimed the Bank of England had intervened to support sterling Currency traders were alarmed at the prospect raised by the Bank of England of British inflation exceeding 3 per cent this year. They continue to be worried over the general threat to the Government's majority from Euro-rebels and the Ulster Unionists, and over the possibility that the Chancellor, Kenneth Clarke, might open up more rifts within the Government over the single European currency in his speech at the European Movement's gala occasion in London tonight.

Gilt-edged prices also weakened in line with the weakening pound, and metal prices continued to fall on the London Metal Exchange.

Cash nickel plunged £750 a tonne to £7,870, tin dropped back by £320 to £5,285 and aluminium lost £150 at £1,824.

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