Published: 27 September 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
The Bank of England said yesterday that it "will not hesitate to change interest rates as necessary" after markets reacted badly to Chancellor Kwasi Kwarteng’s mini-budget. Governor Andrew Bailey said: "The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets,” but he ruled out an emergency meeting of the monetary policy committee to discuss interest rates, suggesting it would stick to its next scheduled meeting in November. The pound fell to a record low against the dollar after Kwarteng’s statement, sparking market speculation that the central bank may be forced to intervene and raise interest rates further than previously announced. It has slumped by almost 10% so far this month alone. Meanwhile, Kwarteng announced he will set out a "medium-term fiscal plan" on 23 November, and that the Office for Budget Responsibility (OBR) will provide its forecasts at the same time, ahead of an OBR forecasted full budget in the spring. He also suggested Friday’s tax cuts were just the beginning, and that more would follow to “revive the UK's stagnant economy.” Rumours abound that he is considering abolishing a charge for parents who earn more than £50,000 and claim child benefit; increasing the annual allowances on pension pots; and a tax break for people who stay at home to care for children or loved ones. He refused to comment on market movements, saying: "I've been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan." A spokesperson for the Prime Minister said she would not comment on market moves or interest rates, adding it was important that Bank of England independence remains. Lord David Frost, Conservative peer and former chief Brexit negotiator, said the reaction on global markets was "an overreaction".
A YouGov survey put Labour 17 points ahead in the polls yesterday, the party's greatest lead since the firm started polling in 2001.
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