Bank will 'not hesitate' to raise interest rates after pound's fall

26.09.2022, 19:33 bbc.com

The Bank of England has said it will "not hesitate" to hike interest rates to curb inflation after the pound fell to a record low against the US dollar. The Bank decided not to hold an emergency meeting to set new rates but said it would change them "by as much as needed" when it meets in November. It came as the Treasury said it will set out plans to cut debt in November in a bid to reassure investors. The pound fell again after the statements from the Bank and Treasury. Sterling fell close to an all-time low earlier after Chancellor Kwasi Kwarteng said he planned further tax cuts, but started to recover during the day. The government said its financial plan on 23 November will have full growth and borrowing forecasts from independent forecaster the Office for Budget Responsibility. It also pledged to set out further details on the government's fiscal rules, including how it will try to decrease debt. Some economists had predicted the Bank of England was going to call an emergency meeting in the coming days to raise rates and help stem the fall in the pound as well as calm high inflation. It followed a steep drop in the value of the pound against the US dollar as global markets reacted to the sharp increase in government borrowing required to fund the biggest tax cuts in 50 years outlined in Friday's mini-budget. A late afternoon double dose of attempted reassurance - firstly from the Treasury, and then from the Bank of England. What's new from the Treasury is a timeline with dates attached. There will be a series of statements from various cabinet ministers about ideas we heard about on Friday. And then in just under two months, a parliamentary moment. What's being described as the "Medium Term Fiscal Plan" - and the Office for Budget Responsibility's number crunching. In short, what the Treasury is attempting to say is this: don't panic, we know what we're doing. Well, let's see what the markets do next. A weak pound makes it more expensive to buy imported goods and risks pushing up inflation. Imports of commodities priced in dollars, including oil and gas, are also more costly. The Bank of England said it was "monitoring developments in financial markets very closely", but said it would "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".