RECESSION OFFICIAL; UK POUND-ED

The pound slid to the lowest level since 1985 against the dollar and posted its biggest weekly drop in three months after a report showed the UK economy shrank more than forecast in the fourth quarter.

The UK currency also declined versus the euro as the economy suffered its biggest contraction since 1980. Bank of England Governor Mervyn King said on Jan. 20 that officials may start buying assets within weeks, after cutting interest rates to the lowest level since 1694. The economy has now shrunk for two consecutive quarters, the definition of a recession.

The pound tumbled this week as UK unemployment climbed in December to the highest level in nine years and home repossessions almost doubled in the third quarter.

The pound dropped as much as 2.7 percent to $1.3503, the lowest level since September 1985, before trading at $1.3681 at 5:56 p.m. in London. The pound fell more than 7 percent this week, the biggest drop since the five days ended Oct. 24. Against the euro, sterling weakened 0.6 percent to 94.29 pence, extending its weekly decline to 4.7 percent.

Gross domestic product fell 1.5 percent from the previous three months, the Office for National Statistics said in London.

The Bank of England will cut its main interest rate, currently 1.5 percent, by a half-percentage point when it meets on Feb. 5, a Credit Suisse Group AG index of derivatives showed.