Interest rates

BoE postpones interest rate decision after Queen Elizabeth’s death

The Bank of England will now vote on rates on Thursday, September 22. Photo: Toby Melville/Reuters

The bank of england (BoE) postponed its next interest rate decision for a week after the death of Queen Elizabeth II.

Members of the Monetary Policy Committee (MPC) will now vote on rates on Thursday, September 22, just a day after the new Chancellor Kwasi Kwarteng is rumored to present its budget plans, instead of September 15 as expected.

This decision is made out of respect for the Queen’s passing. The bank also canceled all data releases scheduled for Friday.

“Given the period of national mourning currently being observed in the UK, the September 2022 meeting of the Monetary Policy Committee has been postponed for a week,” the Bank said.

“The committee’s decision will be announced at noon on September 22.”

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However, the date change has drawn some criticism. Dr Alex Powell, lecturer in law at Oxford Brookes University and Green Party candidate in the Hinksey Park by-election tweeted his objections.

“Delaying the Bank of England interest rate decision and the TUC conference is far too far. The country is in economic crisis. It is inappropriate to put the burden of a forced mourning. Even Buckingham Palace recognized it,” he said.

Threadneedle Street is currently struggling with the strongest inflationary pressures in 40 years, with double-digit figures in the 12 months to July.

Financial markets are betting on a rise of 50 basis points, or up to 0.75 percentage points to 2.5%, which will be the biggest increase since Black Wednesday in 1992.

It follows a similar decision taken this week by the European Central Bank (ECB), which increase in interest rates in the euro zone by a record amount.

The Governing Council of the ECB voted in favor of raising the three key interest rates by 75 basis points, or 0.75% of percentage points, the largest increase in its history and its second consecutive increase .

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It also comes as the BoE received a boost in its fight against inflation from the new Prime Minister Liz Trusswhich unveiled an energy bill assistance package.

According to economists, the Cap of £2,500 announced on Thursdaywhich is expected to cost around £100bn over two years, will allow inflation to peak up to five percentage points below previous forecasts.

“I suspect the size of the package is likely to weigh on the minds of members of the monetary policy committee,” said George Buckley, economist at Nomura. He expects a rate hike of half a percentage point, with more hikes to follow.

Meanwhile, Deutsche Bank (comics) said he expects the BoE to deliver its second straight 50 basis point hike, taking the bank rate to 2.25%.

He said: “On the vote breakdown, we expect a messy result with a 2-5-2 count (25/50/75), with two members voting for 25 bps and 75 bps, respectively.

“On quantitative tightening (QT), we expect the MPC to confirm the start of gilt sales from late September, with a follow-up of £10 billion ($11.6 billion) per quarter.”

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