Bank of England Governor signals interest rates could rise again

Rates may have to be raised higher than initially expected, the Governor of the Bank of England has suggested.

15 October 2022

Interest rates may have to be raised higher than initially expected to tackle inflation, the Governor of the Bank of England has suggested.

In a speech in Washington, Andrew Bailey reiterated that Bank officials will “not hesitate” to raise interest rates if necessary to tackle inflation, while warning that a “stronger” response than previously anticipated could be required.

Public comments by Mr Bailey have taken on increased significance in recent weeks, after the Government’s mini-budget spooked the markets, sent the pound plummeting and forced the independent Bank of England to intervene in a bid to restore financial stability.

The political and economic chaos unleashed by then-chancellor Kwasi Kwarteng’s tax-cutting budget eventually culminated in his sacking on Friday by Prime Minister Liz Truss, as she continues in her bid to restore her Government’s fiscal credibility.

In his short address, Mr Bailey acknowledged what he called the “violent moves” in the UK markets as he signalled that interest rate could be in line to increase again.

On September 22 the Bank’s Monetary Policy Committee (MPC) raised rates by 0.5 percentage points to 2.25%.

Speaking at the G30 annual international banking seminar, Mr Bailey said: “The UK Government has made a number of fiscal announcements and has set October 31 as the date for a further fiscal statement.”

He said that the Bank’s monetary policy committee “will respond to all this news at its next meeting in just under three weeks from now”.

Mr Bailey added: “This is the correct sequence, in my view. We will know the full scope of fiscal policy by then but I will repeat what I have said already: We will not hesitate to raise interest rates to meet the inflation target.

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

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