Interest rate rise will be higher than expected next month, Bank of England chief suggests | Business News

The Governor of the Bank of England suggested that interest rates will have to be raised higher than initially expected in the face of inflationary pressures.

Speaking at an International Monetary Fund event in Washington, Andrew Bailey also said there had been “a very clear and immediate meeting” with new Prime Minister Jeremy Hunt on the need for financial stability and measures. method to achieve that.

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The BoE will announce its next rate decision on November 3, and many investors think they will raise rates from current levels of 2.25% to 3% or possibly 3.25%. , both would be much larger moves than usual.

“We will not hesitate to raise interest rates to meet our inflation target.

“And, as things unfold today, my best guess is that inflationary pressures will require a stronger response than we do.”
probably thought in August”.

The bank had previously predicted that the inflation rate would peak at 11% in October.

Mr Bailey said the bank would assess the impact of the government’s energy assistance program and report the October 31 budget of new Prime Minister Jeremy Hunt, who took over the role on Friday after Kwasi. Kwarteng was fired after a month of financial market turmoil due to his taxes. reduction plan.

He added: “The MPC (Monetary Policy Committee) will respond to all this news at its next meeting in less than three weeks from now.

“This is the correct sequence in my opinion. We’ll know the full scope of fiscal policy by then.”

In another key event on Friday, Chancellor Liz Truss removed the corporate tax rate freeze and said she would instead allow it to rise from April, as planned by the previous government of Older brother.

She also said spending will increase less than planned.

Mr Hunt said “there has been a mistake” in the government’s small budget and some taxes may have to be increased and others may not fall as much as planned.

Mr. Bailey said the bank can run monetary policy – mainly interest rates – to manage the economy and also implement financial stability interventions to address issues like key bond yields. Recent increases in the UK government threaten some pension funds.

The BoE ended its emergency bond purchase on Friday.

“In these difficult times, we need to be clear about the framework for this intervention,” Mr. Bailey said.