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Bank of England rules out emergency interest rates meeting

Governor of the Bank of England Andrew Bailey. Photo: Stefan Rousseau/Pool via Reuters
Governor of the Bank of England Andrew Bailey. Photo: Stefan Rousseau/Pool via Reuters

The Bank of England (BoE) has ruled out an emergency interest rate meeting following a rout in sterling.

However, Andrew Bailey, the Bank governor, said in a statement on Monday that Threadneedle Street's Monetary Policy Committee "will not hesitate to change interest rates by as much as needed" to curb inflation.

Analyst had called on the BoE to raise interest rates in an emergency meeting to help stave off pound collapse.

Read more: Why has the pound fallen and what does this mean for you?

But the Bank governor stopped short of announcing an emergency meeting of policymakers this week and suggested it would stick to its next scheduled meeting in November.

The Bank's statement comes as Kwarteng promised to unveil a plan to bring UK debt back under control after his mini-budget sent sterling crashing.

His huge tax-cutting plan is designed to boost economic growth but has spooked investors, who fear they will run up public borrowing to unsustainable levels.

Kwarteng attempted to calm the markets late on Monday afternoon, with the Treasury promising the chancellor will set out a plan to bring debt back under control on 23 November.

The pound resumed its slide as the comments from the central bank and Treasury department failed to calm markets. It fell 1.8% to $1.06 — although that was up on the record low of $1.03 it hit overnight.

Read more: Pound crashes to all-time low against dollar as Kwarteng signals more tax cuts

Bailey said: "The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets.

"In recent weeks, the government has made a number of important announcements. The government’s Energy Price Guarantee will reduce the near-term peak in inflation. Last Friday the government announced its Growth Plan, on which the chancellor has provided further detail in his statement today.

"I welcome the government’s commitment to sustainable economic growth, and to the role of the Office for Budget Responsibility in its assessment of prospects for the economy and public finances.

"The role of monetary policy is to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term. As the MPC has made clear, it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the government’s announcements, and the fall in sterling, and act accordingly."

The statement then concludes: "The MPC will not hesitate to change interest rates by as much as needed to return inflation to the 2% target sustainably in the medium term, in line with its remit."

Threadneedle Street hiked rates by 0.5% last week to bring inflation, which is currently running at 9.9%, under control.

Watch: How does inflation affect interest rates?