The pound has fallen again against sterling following the Bank of England's surprise move to hike British interest rates to their highest level for five years, despite recent turmoil on world stock markets.
The pound closed at 89.20p against sterling in late trade from 89.89p but held its value against the deutschmark, closing at DM2.5955 from DM2.5942.
The surprise move prompted virulent opposition from economists, who warned that tighter money might elbow Britain into recession.
Sterling rose and the London stock exchange fell further in the aftermath of the rate hike.
However, the Bank of England judged that inflationary pressures represented a greater threat to the British economy than the spectre of plunging share values. Stock exchanges often fall after rate rises, because the advantages of holding cash increase.
The bank said it had "considered the possible impact of recent financial market volatility".
It added that inflation had not fallen as sharply as might have been expected given a rise in the value of the pound since late 1996.
The Confederation of British Industry said it regretted the rise. The British Chambers of Commerce was similarly "disappointed" at the increase. Mr Jim Power, chief economist at Bank of Ireland, said the move could mean the Chancellor of the Exchequer, Mr Gordon Brown, was serious about bringing the British economy into synch with the rest of Europe. A rate rise would slow the economy and when it meets the EU levels, rates could be let fall, he said.
