Pound reaches $2 mark

Last Modified: 17 Apr 2007
By: Emily Reuben

The pound is worth $2 for the first time in 15 years following an increase in inflation.

The Consumer Prices Index has reached 3.1 per cent, forcing the Bank of England to publish an open letter to the Chancellor explaining a plan of action to bring inflation back within a single percentage point of the target figure of 2 per cent.

Governor Mervyn King said in his letter the Bank is "determined" to meet the target and added that its monetary policy committee (MPC) expected CPI to fall back back within target in "a matter of months".

But he added that the committee's next meeting would consider "very carefully" whether other upward pressure on inflation was materialising.

In response, Mr Brown said that the MPC, which sets interest rates, had helped deliver a "decade of low and stable inflation" and said the Government would continue to support the work of the committee.

The prospect of another interest rate rise to cool inflation caused the pound to reach the $2 mark for the first time since 1992, when sterling was ejected from the European Exchange Rate Mechanism.