Bank of England delays interest rates decision after death of Queen Elizabeth II
The Bank of England (BoE) has delayed its upcoming interest rate decision by a week following the death of Queen Elizabeth II.
Monetary policy committee (MPC) members will now vote on rates on Thursday 22 September, just a day after the new chancellor Kwasi Kwarteng is rumoured to present his fiscal plans, instead of 15 September as expected.
The move comes out of respect for the passing of the Queen. The bank also cancelled all data releases scheduled for Friday.
“In light of the period of national mourning now being observed in the United Kingdom, the September 2022 meeting of the monetary policy committee has been postponed for a period of one week,” the Bank said.
“The committee’s decision will be announced at 12 noon on 22 September.”
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However, the date change has been met with some criticism. Dr Alex Powell, lecturer in law at Oxford Brookes University, and Green Party candidate for the Hinksey Park by-election tweeted his objections.
“Delaying the Bank of England interest rate decision and the TUC conference is much too far. The country is in an economic crisis. It is inappropriate to make ordinary people bear the burden of enforced mourning. Even Buckingham Palace recognised this," he said.
Threadneedle Street is currently battling the strongest inflationary pressures for 40 years, with figures hitting double-digits in the 12 months to July.
Financial markets are betting on a hike of either 50 basis points, or as much as 0.75 percentage points to 2.5%, which will be the biggest increase since Black Wednesday in 1992.
It follows a similar move this week from the European Central Bank (ECB), which increased interest rates across the eurozone by a record amount.
The ECB’s governing council voted to raise all three key interest rates by 75 basis points, or 0.75% percentage points — the biggest hike in its history, and its second consecutive increase.
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It also comes as BoE received a boost in its fight against inflation from new prime minister Liz Truss, who unveiled a energy bill support package.
According to economists, the £2,500 cap announced on Thursday, which is expected to cost around £100bn over two years, will allow inflation to peak by up to five percentage points below previous forecasts.
"I suspect that the size of the package is probably going to weigh on the minds of monetary policy committee members," George Buckley, an economist with Nomura, said. He expects a half-percentage point rate rise, with more hikes to follow.
Meanwhile, Deutsche Bank (DB) said it expects the BoE to deliver its second consecutive 50bps hike, taking the bank rate to 2.25%.
It said: “On the vote split, we expect a messy outcome with a 2-5-2 (25/50/75) tally, with two members voting for 25bps and 75bps, respectively.
“On quantitative tightening (QT), we expect the MPC to confirm the start of gilt sales from late September, tracking at £10bn ($11.6bn) per quarter.”