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Bank of England policymakers setting interest rates from home

Bank of England working from home - Daniel Acker/Bloomberg
Bank of England working from home - Daniel Acker/Bloomberg

The Bank of England is setting interest rates over video link despite work from home guidance being scrapped in January.

Despite surging inflation that has triggered a cost-of-living crisis and a government push to get workers back to the office, members of the Bank's Monetary Policy Committee (MPC) are still allowed to attend meetings virtually, The Telegraph understands.

It comes as the Bank refuses to change its hybrid working policy despite criticism from MPs that its public servants should return to their desks more frequently.

Earlier this month, The Telegraph revealed that Threadneedle Street is still only requiring staff to return to the office one day a week.

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Following a consultation at the Bank, staff will be required to go into the office 40pc of the time from next month with plans to increase that to 50pc of the week over time.

The number of people returning to work in the office in the UK has hit the highest level since the start of the pandemic, research by Remit Consulting revealed. The consultancy found that for the week ending May 13, average office occupancy rates for the UK reached 28pc - the highest weekly average recorded over the past year. In London, the average occupancy rate reached 29.3pc.

Separately on Wednesday, the City warned that the Bank of England’s credibility is in peril following botched communications and recent attacks on Threadneedle Street by ministers and MPs.

Economists at Bank of America warned that Bank officials have lost control of two crucial drivers of inflation expectations and risk causing more volatile growth, interest rates and prices.

The Wall Street bank said the Bank of England has become unpredictable and dangerously politicised by quantitative easing, a reluctance to talk about Brexit and recent criticism from government ministers.

Robert Wood, an economist at Bank of America, said predictable policy and a fully independent central bank are vital to keeping a lid on inflation expectations - a key driver of future price growth.

However, he warned the Bank’s monetary policy has become “unpredictable” and is “more at risk of some politicisation”, resulting in it “facing possibly its toughest test since independence”.

Mr Wood added the Bank’s rate-setters are “politically entangled” by its QE programme, which snapped up government debt, and reluctant to talk about Brexit.

He said: “As a result inflation expectations may be less anchored so we expect higher interest rate, growth and inflation volatility.”

Ministers launched an unprecedented attack on the Bank over the weekend as pressure mounts on the Government over the cost of living crisis.

One told The Telegraph that the Bank has been failing to “get things right” after wrongly judging that the current inflation surge would be “transitory”.

Former Bank rate-setters have also lined up to criticise Threadneedle Street. On Tuesday ex-Governor Lord King said the Bank and other central banks had made “serious mistakes” by failing to act sooner on inflation by rapidly increasing interest rates.

Andrew Bailey, the Governor of the Bank, has claimed that policy makers have been left helpless in the face of surging inflation.

Mr Bailey admitted to MPs on Tuesday that the Bank is in a “very, very difficult place”. He told the Treasury Committee: “To forecast 10pc inflation and to say there is not a lot we can do about 80pc of it, I can tell you it is an extremely difficult place to be. We have to recognise the reality of the situation we face.”

A Bank of England spokesman said: “We are working towards everyone spending half of their time in the office, so that we can capitalise on the benefits of working together in person, while maintaining the flexibility offered by home working.

“From 6 June, we expect colleagues to spend a minimum of 40pc of their time in the office per month. Our approach follows a review period during which we consulted with staff across the Bank.”