The pound rose against the dollar and weakened versus the euro after U.K. Chancellor of the Exchequer George Osborne detailed his plan to almost eliminate the nation’s 156 billion-pound ($246 billion) budget deficit. Sterling extended gains versus the U.S. currency and recovered some of its declines against the euro. Osborne’s plan eliminates half a million public-sector jobs, imposes a levy on banks and cuts spending by 81 billion pounds over five years. Bank of England minutes published earlier showed policy makers starting to lean toward more bond purchases to shore up the recovery. Britain’s budget deficit for September jumped. “You can’t have those kinds of austerity measures and have a tight monetary-policy stance at the same time without putting the economy in danger of very, very severe slowdown,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “Sterling is telling us that there was nothing unexpected in the review. Investors on the whole will applaud what the government is doing.” The pound climbed 0.5 percent to $1.5791 as of 2:46 p.m. in London, rebounding from its weakest level in almost a month. Sterling weakened 0.5 percent to 87.88 pence per euro, after depreciating as much as 0.9 percent. The Monetary Policy Committee, led by Governor Mervyn King, split three ways as a majority voted to maintain the key interest rate at 0.5 percent and bond purchases at 200 billion pounds. Some members “felt the likelihood that further monetary stimulus would become necessary in order to meet the inflation target in the medium term had increased in recent months,” the minutes said. ‘Sterling Negative’ The minutes are “dovish and therefore a sterling negative,” said Derrick. “We also saw record public borrowing for September, showing us the scale of the problems we are facing.” The U.K.’s net borrowing for September was 15.6 billion pounds, the most for the month since modern records began in 1993, compared with 14.8 billion pounds a year earlier, the Office for National Statistics said in London today. The median of 13 forecasts in a Bloomberg News survey was a deficit of 14.5 billion pounds. The yield on the two-year gilt fell three basis points to 0.62 percent, with the 10-year bond yield little changed at 3.01 percent, after falling to 2.96 percent. Split MPC BOE Policy maker Andrew Sentance pushed for an increase in the rate to 0.75 percent, while Adam Posen voted to boost the asset-purchase plan, known as quantitative easing, by 50 billion pounds. “Most members felt that the balance of risks had not altered sufficiently to warrant a change in the policy stance at this meeting,” according to the minutes. Osborne’s plans would narrow a deficit that the government forecasts at 10.1 percent of gross domestic product this year to 2.1 percent of GDP in the 2014-15 fiscal year. Debt interest costs would fall by more than 5 billion pounds by 2015. Prime Minister David Cameron yesterday said defense spending will be cut by 8 percent in inflation-adjusted terms. The pound has dropped 5.2 percent this year against a basket of its developed-country peers, according to Bloomberg Correlation-Weighted Currency Indexes, making it the second- worst performing currency, after the euro. To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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