Governor gets tough
Bank chief says half-point rate rise ‘on the table’
Bank of England governor Andrew Bailey said it is considering a half-point rise in interest rates, the biggest for 27 years, as it steps up its battle on inflation.
Ahead of official figures today showing the cost of living has risen by 9.4%, Mr Bailey said a tougher response was needed and that the Bank was ready to ditch its policy of incremental quarter point rises.
He told an audience at the Mansion House in London: “Let me be quite clear: there are no ifs or buts in our commitment to the 2% inflation target. That’s our job, and that’s what we will do.”
Inflation is prompting demands for wage increases and the MPC had already stressed that if pressures remained persistent, more forceful action would be needed, he said.
“In simple terms, this means that a 50 basis point increase will be among the choices on the table when we next meet.”
A half-percentage-point interest rate rise would be the largest increase since 1995.
Mr Bailey, who was one of the six MPC members voting for a quarter-point increase when rates were raised to 1.25% last month, said a half-point increase was “not locked in, and anyone who predicts that is doing so based on their own view”.
The Bank is due to announce its next rates decision on 4 August.
The governor said it was also time for the Bank to draw up plans for selling some of the bonds – totalling £875bn – it has bought since the global financial crisis of 2007-09.
Mr Bailey said the programme could begin as soon as September, and that the Bank was looking to reduce its stock of gilts by between £50bn and £100bn in the first year.
Chancellor Nadhim Zahawi told the audience that the Bank has “a strong track record”
In what may be seen as a dig at leadership candidate Liz Truss who wants to review ministerial control over the Bank, Mr Zahawi told the audience: “They have all the tools they need. And I know they have complete determination to do what is required
He confirmed that he intends to revoke the remaining EU laws governing financial services and replace them with a new set of “agile” regulations.
In his first speech as Chancellor, Mr Zahawi said that the Financial Services and Markets Bill will be introduced today. It is billed as the most significant piece of legislation affecting the sector for over a decade.
The Bill will implement the government’s vision for the sector to be open, green, technologically advanced and globally competitive while maintaining high levels of consumer protection. Full story here