LONDON — The Bank of England on Friday postponed next week’s interest rate decision following the death of Queen Elizabeth, its first delay to a monetary policy meeting since the central bank became operationally independent 25 years ago.
Sterling fell half a cent against the dollar as the BoE said it was rescheduling its next announcement on interest rates and other decisions until Sept. 22 from an original date of Sept 15.
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“In light of the period of national mourning now being observed in the United Kingdom, the September 2022 meeting of the Monetary Policy Committee (MPC) has been postponed for a period of one week,” the BoE said in a statement.
“The Committee’s decision will be announced at 12 noon on 22 September.”
Economists have said they mostly expect the BoE to raise interest rates by another 50 basis points, although some in financial markets expect an even bigger hike of 75 basis points.
Ellie Henderson, an economist with Investec, said the change in timing of the meeting increased the chance of a three-quarters-of-a-percentage-point rate hike because the MPC might not meet after a new budget plan is announced by the government.
New finance minister Kwasi Kwarteng is expected to deliver tax cuts, as promised by Prime Minister Liz Truss during her Conservative Party leadership campaign, although no date has yet been set for the first fiscal plan of her government. Parliamentary business has been suspended until after Sept. 21.
“Prior to today’s announcement our base case looked for a half-point rise to the Bank rate to 2.25%, but this was based on the thinking that the MPC would not have the full details of the fiscal package by the time the committee met,” Henderson said.
“Reflecting on the new timings, the risk of an outsized 75bp hike has certainly heightened.”
The BoE also pushed back its planned start of sales from its stock of corporate bonds, much of it accumulated during the COVID-19 pandemic, by a week to Sept. 27. (Reporting by Kate Holton; editing by William James, William Schomberg and Jonathan Oatis)