Bank of England governor Bailey puts largest rate rise since independence on table
The biggest rate hike since the Bank of England was made independent 25 years ago is on the table at its next meeting on 4 August, its chief said today.
Delivering his annual Mansion House bankers’ dinner speech, Andrew Bailey said “a 50 basis point increase will be among the choices on the table when we next meet”.
Threadneedle Street has never raised interest rates by more than 25 basis points since it was handed control of monetary policy by then Labour chancellor Gordan Brown in 1997.
Speculation that the Bank will launch the unprecedented move has been triggered by inflation reaching a 40-year high of 9.1 per cent.
Investors are betting Bailey and the rest of the monetary policy committee (MPC) will need to accelerate policy tightening to tame spiralling living costs.
Bailey tried to roll back expectations, however. A “50 basis points is not locked in, and anyone who predicts that is doing so based on their own view,” he said.
The MPC has lifted borrowing costs at each of its last five meetings, sending them to a 13-year high of 1.25 per cent. They are still low by historical standards.
Bailey hit back at hints from Tory leadership hopefuls questioning the effectiveness of the Bank’s independence and inflation target.
“These times are the largest challenge to the monetary policy regime of inflation targeting that we have seen in the quarter century since the MPC was created in 1997.”
“The regime, founded on central bank independence, is now more important than ever. The worth of any regime is tested in the difficult, not the nice, times,” he added.
The UK’s monetary authority sent armoured vehicles to Ukraine to transfer money around the country, the governor also said.
Bank staff drove a “fleet of three vehicles… due to be taken out of service” to the Polish-Ukraine border “and handed them over,” Bailey, 63, said.
The aid was provided in response to the governor of the National Bank of Ukraine asking Bailey personally for vehicles “to support cash distribution” around the country, the governor said.