Bank of England says it won’t hesitate to hike rates after pound falls to historic low

Date: September 26, 2022


News Author(s): Sam Meredith and Elliot Smith
Photo Credit: Sopa Images | Lightrocket | Getty Images


LONDON — The Bank of England on Monday said it is monitoring financial market developments “very closely” after a dramatic morning of turmoil saw the British pound fall to an all-time low against the U.S. dollar.

Sterling fell as much as 4.8% to trade below $1.04 in the early hours of Monday morning, extending losses from late last week when Finance Minister Kwasi Kwarteng outlined the new U.K. government’s so-called mini-budget.

The U.K. currency pared some of its losses through the session but extended its fall versus the dollar immediately after the Bank of England’s statement.

Sterling was last seen trading 1.3% lower at $1.0713.

“The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets,” Bank of England Governor Andrew Bailey said in a statement.

“The role of monetary policy is to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term,” Bailey said.

The BOE governor said the central bank’s monetary policy committee would make a “full assessment” at its next scheduled meeting in November, “and act accordingly.”

“The MPC will not hesitate to change interest rates as necessary to return inflation to the 2% target sustainably in the medium term, in line with its” responsibility, he added.

The announcement by Prime Minister Liz Truss’ administration featured a volume of tax cuts not seen in Britain since 1972 and an unabashed return to the “trickle-down economics” promoted by the likes of Ronald Reagan and Margaret Thatcher.

The radical policy moves put the U.K. at odds with most major global economies at a time of sky-high inflation and a worsening cost-of-living crisis.

Fiscal plan

The U.K. Treasury on Monday afternoon said the government would set out its medium-term fiscal plan on Nov. 23.

Kwarteng requested the independent Office for Budget Responsibility set out a full forecast alongside the plan, the Treasury said.

To be sure, Friday’s mini-budget was not accompanied by the usual economic forecasts from the OBR.

“The Fiscal Plan will set out further details on the government’s fiscal rules, including ensuring that debt falls as a share of GDP in the medium-term,” the Treasury said in a statement.

The government also intends to lay out supply-side growth reforms from next month, it added.


Keywords:, Sterling House Trust, SHT