Black Wednesday was 16 September 1992, when Britain suspended sterling's membership of the European Exchange Rate Mechanism. The government raised the base rat…
A system of bands keeping European currencies close to each other, anchored in practice by the Deutschmark.
Sterling entered at DM2.95 with a 6% band, a floor of about DM2.78. Chancellor John Major hoped it would tame inflation.
Britain was in recession; the Bundesbank kept rates high. Danish voters rejected Maastricht on 2 June.
Italy devalued the lira 7%. Then Bundesbank chief Schlesinger was reported backing a wider realignment.
The Bank of England bought sterling heavily and the base rate rose from 10% to 12%.
A further rise to 15% was announced for the next day. Traders did not believe it could last. Selling went on.
Chancellor Norman Lamont suspended ERM membership. The 15% rise was cancelled; rates were 10% the next day.
A 1-4% target for underlying inflation. Rates fell to 6% by January 1993.
Labour won a landslide and gave the Bank control of interest rates. Britain never joined the euro.
Treasury papers released under Freedom of Information put the loss at about £3.3bn.
Short gilts had their worst day since Black Wednesday on 19 March bar 2022; 30-year yields hit 6.036% on 7 Oct.
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