London Daily

Focus on the big picture.
Thursday, Sep 18, 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
Nvidia’s $5 Billion Bet on Intel Reshapes AI Hardware Landscape
Trump and Starmer Clash Over UK Recognition of Palestinian State Amid State Visit
Trump’s Quip on Biden and Google Lawsuit Revives Debate Over Antitrust Legacy
Macron and his wife to provide 'scientific photographic evidence' that she is a real woman
US Tech Giants Pledge Billions to UK AI Infrastructure Following Starmer's Call
Saudi Arabia cracks down on music ‘lounges’ after conservative backlash
DeepMind and OpenAI Achieve Gold at ‘Coding Olympics’ in AI Milestone
SEC Allows Public Companies to Block Investors from Class-Action Lawsuits
Saudi Arabia Signs ‘Strategic Mutual Defence’ Pact with Pakistan, Marking First Arab State to Gain Indirect Access to Nuclear Strike Capabilities in the Region
Federal Reserve Cuts Rates by Quarter Point and Signals More to Come
Effective and Impressive Generation Z Protest: Images from the Riots in Nepal
European manufacturers against ban on polluting cars: "The industry may collapse"
Sam Altman sells the 'Wedding Estate' in Hawaii for 49 million dollars
Trump: Cancel quarterly company reports and settle for reporting once every six months
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
US Launches New Pilot Program to Accelerate eVTOL Air Taxi Deployment
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Hong Kong Industry Group Calls for HK$20 Billion Support Fund to Ease Property Market Stress
Joe Biden’s Post-Presidency Speaking Fees Face Weak Demand amid Corporate Reluctance
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
×