Pound dips on expectations of rate cut

THE POUND dropped sharply against the mark and dollar yesterday on the belief that interest rates will soon be cut again in Britain, but not in Germany, writes Robert Chote.

The pound fell 0.7 points against a basket of currencies to close at 79.5 per cent of its 1985 value, its lowest since the end of March.

Hopes of a rate cut - fuelled by weak money supply figures - also buoyed gilts and pushed the FT-SE 100 share index 13.8 points higher to 2,863.

The Treasury was happy to see the pound strengthen through most of last month, allowing an underlying rise of dollars 78m in the Government's reserves of gold and foreign currency.

The Central Statistical Office produced figures yesterday showing that the gap between rich and poor people's incomes narrowed slightly in 1991, against the trend of growing inequality during the 1980s. But incomes remain more unequally distributed than at any time in the 1980s.

The CSO's monthly Economic Trends also showed that personal income per head in London averaged pounds 11,151 in 1991, 25 per cent above the national average. The figure for Northern Ireland was 18 per cent below the national average at pounds 7,327.

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