London Daily

Focus on the big picture.
Saturday, Nov 01, 2025

Interest rate rise will be higher than expected next month, Bank of England chief suggests

Interest rate rise will be higher than expected next month, Bank of England chief suggests

Andrew Bailey says there has been "a very clear and immediate meeting of minds" with the new Chancellor Jeremy Hunt on the need for financial stability and the measures to achieve it and indicated his concern with the direction taken by his predecessor, Kwasi Kwarteng.

Interest rates will have to be raised higher than initially hoped in the face of inflationary pressures, the Bank of England (BoE) governor has suggested.

Speaking at an International Monetary Fund event in Washington, Andrew Bailey also said there had been "a very clear and immediate meeting of minds" with new Chancellor Jeremy Hunt on the need for financial stability and the measures to achieve it.

It comes after Mr Hunt has said there "were mistakes" in last month's government mini-budget, and pointed out some taxes may have to rise and others might not fall as much as planned.

He added it was an error to "fly blind" by not accompanying the "fiscal event" with an economic forecast by the Office for Budget Responsibility (OBR), which many argue sent the financial markets into turmoil.

The BoE is due to announce its next decision on interest rates, which will impact household mortgages, on 3 November and many investors think it will either raise them from their current level of 2.25% to 3% or possibly 3.25%, both of which would be much bigger moves than usual.

Mr Bailey said: "We will not hesitate to raise interest rates to meet the inflation target.

"And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we
perhaps thought in August."

The bank previously predicted the rate of inflation would peak at 11% in October, while its goal was 2%.

Mr Bailey said the bank would assess the impact of the government's energy support scheme and the 31 October budget statement of Mr Hunt, who took up the role on Friday after Kwasi Kwarteng was sacked following the economic chaos fuelled by his unfunded tax cut plans.

He added: "The MPC (Monetary Policy Committee) will respond to all this news at its next meeting in just under three weeks from now.

"This is the correct sequence in my view. We will know the full scope of fiscal policy by then."

In a further major U-turn on Friday, Prime Minister Liz Truss scrapped a freeze in corporation tax and said she would instead allow it to rise from April, as planned by Boris Johnson's government.

The government had already rowed back on ditching the top 45p tax rate for the highest earners in the face of a Tory backlash.

Ms Truss also said spending would increase by less than planned.

Mr Bailey said: "I can tell you that I spoke to Jeremy Hunt, the new chancellor, yesterday (Friday).

"I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that.

"Jeremy is now working on what will be the fiscal statement. It's not for me and it's not appropriate for me to constrain the choices he makes.

"But a very clear message I would give, and it's a clear message for everybody, including a clear message for markets.

"I can tell you there is a very clear and immediate meeting of minds on the importance of stability and sustainability."

Mr Bailey also indicated his concerns over the direction taken by the former chancellor, pointing to a statement he issued in the wake of the mini-budget.

He said: "I felt I had to. It's not something I make a habit of doing but given the situation.

"I also don't make a habit of commenting on fiscal policy as a rule, because that's not my job.

"But I made two points on fiscal policy... which are of clear relevance to the central bank.

"One was to emphasise the importance of sustainability of fiscal policy and the second, which was part of that, was to emphasise the need to have the Office for Budget Responsibility involved - that flying blind is not the way to achieving sustainability."

Mr Bailey said the bank was able to operate monetary policy - chiefly interest rates - to manage the economy and also make financial stability interventions to address issues such as the recent surge in British government bond yields that threatened some pension funds.

The BoE ended its emergency bond-buying on Friday.

"In these difficult times, we need to be very clear on this framework of intervention," Mr Bailey said.

Newsletter

Related Articles

0:00
0:00
Close
U.S. Secures Key Southeast Asia Agreements to Reshape Rare Earth Supply Chains
US and China Agree One-Year Trade Truce After Trump-Xi Talks
BYD Profit Falls 33 % as Chinese EV Maker Doubles Down on Overseas Markets
US Philanthropists Shift Hundreds of Millions to UK to Evade Regulatory Uncertainty in Trump Era
Israeli Energy Minister Delays $35 Billion Gas Export Agreement with Egypt
King Charles Strips Prince Andrew of Titles and Royal Residence
Trump–Putin Budapest Summit Cancelled After Moscow Memo Raises Conditions for Ukraine Talks
Amazon Shares Soar 11% as Cloud Business Hits Fastest Growth Since 2022
Credit Markets Flooded with More Than $200 Billion of AI-Linked Debt Issuance
U.S. Treasury Secretary Scott Bessent Says China Made 'a Real Mistake' by Threatening Rare-Earth Exports
Report Claims Nearly Two Billion Dollars in Foreign Charity Funds Flowed into U.S. Advocacy Groups
White House Refutes Reports That US Targeting Military Sites in Venezuela
Meta Seeks Dismissal of Strike 3’s $350 Million Copyright Lawsuit
Apple Exceeds Forecasts With $102.5 Billion Q3 Revenue Despite iPhone Miss
Israel's IDF Major General Yifat Tomer-Yerushalmi Admits to Act Amounting to Aiding Hamas During Wartime (Treason)
Shawbrook IPO Marks London’s Biggest UK Listing in Two Years
UK Government Split Over Backing Brazil’s $125 Billion Tropical Forest Fund Ahead of COP30
J.K. Rowling Condemns Glamour UK Feature of Nine Trans Women as 'Men Better at Being Women'
King Charles III Removes Prince Andrew’s Titles and Orders His Departure from Royal Lodge
UK Finance Minister Reeves Releases Email Correspondence to Clarify Rental-Licence Breach
UK and Vietnam Sign Landmark Migration Deal to Fast-Track Returns of Irregular Arrivals
UK Drug-Pricing Overhaul Essential for Life-Sciences Ambition, Says GSK Chief
Princesses Beatrice and Eugenie Temporarily Leave the UK Amid Their Parents’ Royal Fallout
UK Weighs Early End to Oil and Gas Windfall Tax as Reeves Seeks Investment Commitments
UK Retail Inflation Slows as Shop Prices Fall for First Time Since Spring
Next Raises Full-Year Profit Guidance After Strong Third-Quarter Performance
Reform UK’s Lee Anderson Admits to 'Gaming' Benefits System While Advocating Crackdown
United States and South Korea Conclude Major Trade Accord Worth $350 Billion
Hurricane Melissa Strikes Cuba After Devastating Jamaica With Record Winds
Vice President Vance to Headline Turning Point USA Campus Event at Ole Miss
U.S. Targets Maritime Narco-Routes While Border Pressure to Mexico Remains Limited
Bill Gates at 70: “I Have a Real Fear of Artificial Intelligence – and Also Regret”
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Saudi Arabia Unveils Vision for First-Ever "Sky Stadium" Suspended Over Desert Floor
Amazon Announces 14 000 Corporate Job Cuts as AI Investment Accelerates
UK Shop Prices Fall for First Time Since March, Food Leads the Decline
London Stock Exchange Group ADR (LNSTY) Earns Zacks Rank #1 Upgrade on Rising Earnings Outlook
Soap legend Tony Adams, long-time star of Crossroads, dies at 84
Rachel Reeves Signals Tax Increases Ahead of November Budget Amid £20-50 Billion Fiscal Gap
NatWest Past Gains of 314% Spotlight Opportunity — But Some Key Risks Remain
UK Launches ‘Golden Age’ of Nuclear with £38 Billion Sizewell C Approval
UK Announces £1.08 Billion Budget for Offshore Wind Auction to Boost 2030 Capacity
UK Seeks Steel Alliance with EU and US to Counter China’s Over-Capacity
UK Struggles to Balance China as Both Strategic Threat and Valued Trading Partner
Argentina’s Markets Surge as Milei’s Party Secures Major Win
British Journalist Sami Hamdi Detained by U.S. Authorities After Visa Revocation Amid Israel-Gaza Commentary
King Charles Unveils UK’s First LGBT+ Armed Forces Memorial at National Memorial Arboretum
At ninety-two and re-elected: Paul Biya secures eighth term in Cameroon amid unrest
Racist Incidents Against UK Nurses Surge by 55%
UK Chancellor Rachel Reeves Cites Shared Concerns With Trump Administration as Foundation for Early US-UK Trade Deal
×