Andrew Bailey has failed to convince markets that he can avoid an emergency interest rate rise after the pound slumped to a record low.

Sterling crashed beneath $1.04 for the first time ever early on Monday morning as traders panicked over the impact of the Government's plans for an unfunded £45bn tax cut.

It prompted a wave of speculation that the Bank of England Governor would be forced to step in with a rate rise, which lifted the pound back above $1.09.

But in a statement issued on Monday evening, Mr Bailey insisted that although Threadneedle Street was "monitoring developments in financial markets very closely," the Bank does not expect to take any action until its next scheduled meeting in November.

The intervention sparked a further slump in sterling, sending it back down by 1.7pc below $1.07. The Bank and Treasury were expected to be monitoring trading closely overnight in Asia in case of a further drop.

Meanwhile financial markets are still betting on a 1.75 percentage point increase in interest rates by early November — a very large rise which suggests traders think emergency action is likely before the next meeting of the Bank's Monetary Policy Committee (MPC).

They expect Mr Bailey will be forced to go even further in the following months, raising the base rate to 6pc early next year — its highest since 2000.

In his statement, the Governor said: "As the MPC has made clear, it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the Government’s announcements, and the fall in sterling, and act accordingly.

"The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2pc target sustainably in the medium term, in line with its remit."

One currency trader at a large bank said that officials’ efforts were “very, very weak”.

They said: “The market is panicky, it's very shaky. It has no faith in the Bank of England, and it believes they can force them into doing an inter-meeting rate hike."

A senior executive at another major bank added: "It feels like a long time until the next MPC meeting before rates move again."

The market chaos also triggered an announcement by the Treasury. It said that Kwasi Kwarteng, the Chancellor, would set out “further supply-side growth measures in October and early November, including changes to the planning system, business regulations, childcare, immigration, agricultural productivity and digital infrastructure”.

This will be followed by a “medium-term fiscal plan”, new borrowing targets and fresh forecasts from the Office for Budget Responsibility — which did not get to set out projections alongside last-week’s mini-budget — on November 23.

Mr Kwarteng will face questions about his actions at a meeting with City executives on Tuesday, according to an insider at one company attending. Economists were also underwhelmed by the plans.

Andrew Goodwin at Oxford Economics said the moves are “a very small step in the right direction but no more than that”.

He added: “It does at least demonstrate that HM Treasury has started to listen.

“But markets are going to want to see the numbers before they are convinced and telling them to sit tight for two months is a very poor look – it certainly doesn’t give the impression the Treasury is on top of this situation or that it currently has a plan.”

Jordan Rochester, an analyst at Nomura, said the pound will drop to parity with the dollar in November and keep falling from there.

He expects £1 to be worth $0.975 by the end of the year then drop further to $0.95 into 2023.

Malcolm Barr, economist at JP Morgan, said the intense pressure shows markets “are not willing to trust the Truss administration’s claims that it will deliver medium term fiscal sustainability on the basis of its word alone”.

Mr Barr said: “In our view, that reflects a broader distrust in markets about how UK policy making has been evolving. And in our view, that distrust is entirely justified."

A senior official at the US Federal Reserve also raised concerns about the reaction to Mr Kwarteng's tax cuts, which markets are concerned have put the public finances on an unsustainable path.

Raphael Bostic, president of the Atlanta Fed, said the plan “has really increased uncertainty and... caused people to question what the trajectory of the economy is going to be”.

Asked whether the proposals increased the chance of a global recession, Mr Bostic said: “It doesn’t help."