| Powered by readers, open to all. | | | |  A plethora of problems have sent sterling sliding to a new 37-year low against the US dollar, ahead of a crunch Bank of England interest rate decision.
The pound has dropped to $1.123 this morning, the lowest since 1985, extending its recent slump – it's now down almost 17% so far this year.
It lost more ground against the rampant dollar after America's Federal Reserve delivered its third hefty interest rate rise in a row last night, lifting rates by another 75 basis points (three-quarters of a percent).
Anxiety about Vladimir Putin's threat of nuclear retaliation against the west are hitting the markets.
UK assets are also being weighed down by concerns over Liz Truss's push for unfunded tax cuts and spending pledges such as yesterday's energy price cap for non-domestic users, which will add to borrowing.
Yesterday's August public finances, showing the UK borrowed almost twice as much as expected, has added to the pressure.
Fed chair Jerome Powell rattled investors last night by insisting, again, that the central bank would keep tightening rates to push down inflation, and wouldn't rule out a recession.
Powell warned: "We have always understood that restoring price stability while achieving a relatively modest increase in unemployment and a soft landing would be very challenging. And we don't know. No one knows whether this process will lead to a recession or if so, how significant that recession would be."
This drove investors into the dollar, which has hit two-decade highs against the euro and the yen this morning too.
But will the Bank of England deliver a hawkish rate hike too?
The money markets say there's roughly an 90% chance that the BoE will raise Bank Rate by 75 basis points at noon today, to 2.5%.
That would be its biggest raise increase since 1989, and take borrowing costs to their highest levels since late 2008.
But some economists think the Bank might "only" raise rates by another half a percent, repeating last month's move (which was the biggest rise since 1995).
Policymakers may want to see the impact of the government's energy bill freeze, which is likely to prevent inflation soaring as much as feared in the short term – while also adding to price pressure further ahead.
The Bank could also announce the start of 'quantitative tightening', cutting back its holding of UK government debt bought during the financial crisis, and the pandemic.
Kallum Pickering, senior economist at Berenberg, suggests this might lead the Bank towards a half-point rate rise: "While 75bp is far from inconceivable, 50bp remains more likely, in our view. Remember, in addition to raising rates, the BoE looks set to announce the start of active selling gilts as part of its quantitative tightening policy.
"As financial conditions are already tightening as benchmark rates edge ever higher, we believe the BoE will wait to see the impact of active QT before deciding on whether to steepen the trajectory of rate hikes."
A smaller hike could further weaken the pound. And either way, higher borrowing costs will add to the burden on consumers amid the cost of living squeeze.
It's a busy day for monetary policy. Switzerland and Norway's central banks are both setting interest rate today – with the Swiss National Bank expected to raise rates by 75bp, out of negative territory.
The agenda
• 8.30am BST: Swiss National Bank interest rate decision
• 9am BST: Norway's Norges Bank interest rate decision
• 9.30am BST: ONS's economic activity and business insights data on UK economy
• 12pm BST: Bank of England interest rate decision
• 1.30pm BST: US weekly jobless claims
• 2.15pm BST: Treasury Committee to scrutinise yesterday's energy price cap announcement and look ahead to mini-budget
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Silencing mini-budget analysis will not help Truss woo the markets 
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