Bank of England will “not hesitate” to change interest rates

In a statement by its governor Andrew Bailey, the bank has also said its monetary policy committee (MPC) will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the government’s announcement and act accordingly. 

It comes as sterling hit a record low against the dollar, plunging by nearly five percent - with it at one point hitting around $1.0327. It had recovered to $1.09 earlier yesterday afternoon (26 September), before falling down back below $1.06. 

It follows chancellor Kwasi Kwarteng’s “mini-budget” last Friday (23 September) in which he announced he’s going to cut the basic rate of income tax by 1p, the cap on bankers’ bonuses will be axed and the planned rise in National Insurance will be cancelled. 

It comes in addition to the government’s Energy Price Guarantee, which will see household energy prices capped at £2,500 a year for two years - with a similar cap in place for six months for businesses. Most of these policies will be financed by an increase in government borrowing. 

Bailey welcomed the Energy Price Guarantee, which will reduce the near-term peak in inflation as well as the government’s commitment to “sustainable economic growth”.