The Bank of England has said it will "not hesitate" to hike interest rates to curb inflation after the pound fell to a record low against the US dollar.

The Bank said it was "monitoring developments closely" and would make a decision on any action in November.

Its statement came after the Treasury said it would publish a plan to tackle debt in a bid to reassure investors.

In Asia currency market trade on Tuesday, the pound rose by more than 1% to top $1.08.

On Monday, some UK lenders said that they were halting new mortgage deals.

Halifax, the UK's largest mortgage lender, said it would temporarily withdraw all mortgage products that come with a fee due to the market volatility.

Virgin Money and Skipton Building Society have also stopped offering mortgage products to new customers.

Experts said a rise in the cost of long-term borrowing due to the market turmoil meant the cost to lenders of offering new mortgage deals was too expensive.

Sterling fell to an all-time low earlier against the US dollar after Chancellor Kwasi Kwarteng pledged further tax cuts at the weekend on top of Friday's mini-budget where he announced the biggest tax cuts in 50 years.

The pound had been sliding as global markets reacted to the sharp increase in government borrowing required to fund the cuts.

A weak pound makes it more expensive to buy imported goods and risks pushing up the rising cost of living even further. Imports of commodities priced in dollars, including oil and gas, are also more expensive.

UK inflation, the rate at which prices rise, is already rising at its fastest rate for 40 years.

Some economists had predicted the Bank of England would call an emergency meeting in the coming days to raise interest rates in a bid to stem the fall, as well as calming rising prices.

But the Bank of England instead said it was "monitoring developments in financial markets very closely" and would make a full assessment at its next meeting on 3 November.

Investors are now predicting that interest rates could more than double by next spring to 5.8% from their current 2.25%, to curb high inflation, which is expected to be fuelled by the huge tax cuts announced in Friday's mini-budget.

'Not affordable'

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said if interest rates rise as predicted, the average household refinancing a two-year fixed rate mortgage in the first half of next year would see monthly payments jump to £1,490 from £863.

"Many simply won't be able to afford this," he said.

Source: BBC