Category Archives: Bank of England

Bank of England in £65bn scramble to avert financial crisis

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Bank of England left with no action but to intervene after Kwasi Kwarteng’s mini-budget

The Bank of England has been forced into emergency action to halt a run on Britain’s pension funds after the impact of Kwasi Kwarteng’s ill-received mini budget prompted fears of a 2008-style financial crisis.

Threadneedle Street said the fallout from a dramatic rise in government borrowing costs since the chancellor’s statement had left it with no choice but to intervene to protect the UK’s financial system.

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Homeowners warned of ‘significant’ rise in UK interest rates

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Bank of England’s chief economist speaks out after mini-budget, with financial markets expecting rates to reach up to 6%

Britain’s homeowners have been warned to brace themselves for a “significant” increase in interest rates from the Bank of England in response to Kwasi Kwarteng’s tax-cutting mini-budget last week.

Huw Pill, Threadneedle Street’s chief economist, added to the concerns of millions of mortgage payers who have already seen hundreds of home loan products pulled by lenders in anticipation of a big increase in the cost of borrowing.

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UK in recession and further interest rate hikes probable, Bank warns Kwarteng

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Threadneedle Street makes clear on eve of tax-cutting mini-budget that plans risk triggering more rate rises

The Bank of England has warned Kwasi Kwarteng the economy is in recession and it will most probably need to push interest rates higher after Friday’s tax-cutting mini-budget.

On the eve of a major package of support from the chancellor designed to break what he called the economy’s “cycle of stagnation”, Threadneedle Street said the UK economy was heading for a second consecutive quarter of falling output, with gross domestic product set to shrink 0.1% in the three months to September.

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Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflation

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Third outsized rate increase in a row as central bank struggles to fight runaway inflation, increasing the cost of everything

The Federal Reserve announced another sharp hike in interest rates on Wednesday as the central bank struggles to rein in runaway inflation.

The Fed raised its benchmark interest rate by 0.75 percentage points, the third such outsized rate increase in a row, bringing the Fed rate to 3%-3.25% and increasing the cost of everything from credit card debt and mortgages to company financing.

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Economists call for radical shakeup of Bank’s interest rate committee

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MPC is dominated by people with little ‘real world’ knowledge and prone to groupthink, says ex-committee member

Members of the Bank of England’s interest-rate setting body should be appointed by the devolved administrations and by English MPs in order to counter groupthink, a former member of Threadneedle Street’s monetary policy committee has said.

David Blanchflower said the committee was dominated by people with little knowledge of the “real world”, and greater diversity of thought was needed to ensure the interests of ordinary people were reflected.

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Biggest interest rate rise for 25 years could spell showdown at the Bank

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This week’s decision could pit Bank of England governor Andrew Bailey against an expansionary PM and chancellor

A lightning strike from the Bank of England awaits. Having delayed its decision until after the period of national mourning for the death of the Queen, Threadneedle Street could this week launch the biggest rise in borrowing costs for at least 25 years.

Announcing its plans a day before Kwasi Kwarteng’s mini-budget on Friday, the central bank is widely expected to use a fast and forceful rate increase to show its commitment to tackling soaring borrowing costs – despite the gathering storm clouds for the British economy.

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People race to exchange paper banknotes before deadline

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Queues form at Bank of England to swap old £20s and £50s before they stop being legal tender

Consumers are racing to exchange their old paper banknotes for new plastic versions, just over a fortnight before they cease to be legal tender at the end of September.

The Bank of England has warned people to expect long queues at its headquarters at Threadneedle Street in the City of London as they try to swap paper £20 and £50 notes.

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Bank of England will not take foot off throttle despite drop in inflation

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MPC members will look at other developments in UK and abroad in mission to increase interest rates

The drop in inflation from 10.1% in July to 9.9% last month is not going to trouble the Bank of England’s policymakers when they meet next week to set interest rates. Its monetary policy committee (MPC) is on a mission to increase the cost of borrowing to bring down inflation to 2%. Prices growth that sticks at almost 10% is still too high. One month’s figures are not a trend.

The nine MPC members will also ponder several other developments at home and abroad that can be considered reasons to increase interest rates.

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How is Liz Truss’s government challenging ‘Treasury orthodoxy’?

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Sir Tom Scholar’s removal as Treasury’s top mandarin signals attempt to change department’s view of the world

Sir Tom Scholar’s removal as the Treasury’s top mandarin was a brutal statement of intent by Liz Truss’s new government. The message was clear: the days when Britain’s economic strategy would be determined by bean counters were over. From now on, growth rather than balancing the books would be the priority.

That is the theory. In practice, removing what Truss sees as the “dead hand” of Treasury orthodoxy from the running of the economy is likely to prove difficult. The fact that all four deputy governors of the Bank of England are Treasury old boys is an example of its influence on the economic policy-making machinery. There have been attempts in the past to cut Whitehall’s most powerful department down to size. Sooner or later, all have failed.

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Liz Truss holds first cabinet meeting as Thérèse Coffey denies claim PM put loyalty before competence – UK politics live

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Health secretary says Truss did not focus too much on rewarding friends as new ministers attend first cabinet meeting

According to a report by Jason Groves in the Daily Mail, Liz Truss may announce an end to the ban on fracking this week. During the leadership campaign she said she wanted to allow fracking, but only in areas where there was a clear public consensus in favour.

On the Today programme this morning Lord Deben, the Tory peer who chairs the Committee for Climate Change, said fracking was not a solution to the UK’s energy problems. He explained:

The price of gas is not affected by the relatively small amount that we can get, in addition to the North Sea or indeed from fracking.

This is an international price and we would be paying the same price we got out of the fracked gas as we are for the gas we’re using now.

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City regulators clears HBOS ex-bosses of misconduct over bank’s near-collapse

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Watchdogs say six-year investigation had determined no grounds for action against unnamed individuals

City regulators have cleared former bosses of HBOS of misconduct in the lead-up to its near-collapse in 2008, despite previously having blamed the bank’s board for its failure.

The Bank of England and Financial Conduct Authority (FCA) said on Friday that they had concluded “rigorous and forensic investigations” into unnamed former managers, after gathering more than 2m documents, interviewing former bank managers, and undertaking “substantial analysis” of the bosses’ roles and responsibilities at what was then the country’s biggest mortgage lender and savings institution.

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UK economy shrank by 0.1% in three months to June

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ONS says two bank holidays to mark Queen’s jubilee contributed to fall in output in June

Britain’s economy contracted by 0.1% in the three months to June, according to official figures that revealed the weakening outlook for the UK, which is expected to enter a recession later this year.

The dip in output in the second quarter followed 0.8% growth in the first quarter and was driven by the health sector – as Covid testing and the vaccine programme was wound down – and by retail, as household spending fell. Economists had forecast a bigger fall in output of 0.2% in the second quarter.

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Truss ‘irresponsible’ for threatening to review Bank of England remit

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Labour’s Rachel Reeves says Conservatives are ‘playing blame game’ for UK’s economic problems

Liz Truss has been accused of being “deeply irresponsible” for threatening to tinker with the Bank of England’s mandate on the brink of a recession.

The shadow chancellor, Rachel Reeves, attacked the Tory leadership frontrunner after Truss and her allies repeatedly questioned the performance of the Bank’s governor, Andrew Bailey, and said she would review the institution’s remit.

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Bank of England hikes interest rates and says inflation will hit 13%

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Base rate raised by 0.5 percentage points to 1.75%, as Bank says inflation will hit 13% in October

Vladimir Putin’s invasion of Ukraine has left Britain on course for a recession lasting more than a year and inflation above 13%, the Bank of England has warned as it raised interest rates for a sixth successive time.

Threadneedle Street said it had no choice but to increase borrowing costs by 0.5 percentage points to 1.75%, blaming Russia for cost of living pressures not seen in more than four decades and a 5% drop in living standards straddling this year and next – the biggest since records began in the 1960s.

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Liz Truss’s tax and spending plans sow consternation among economists

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Analysis: experts are lining up to warn that her policies will increase inflation and leave the UK with higher debt

Liz Truss claims her economic agenda of tax cuts and public spending will revitalise the UK economy, but it is not just her rival prime ministerial candidate Rishi Sunak arguing that the measures will be self-defeating.

Economists have lined up to warn that her £30bn package – including the reversal of this year’s national insurance rise, the suspension of green levies on power bills, and the cancellation of a sharp rise in corporation tax in 2023 – will increase inflation and leave the government with higher debt bills.

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UK inflation hits fresh 40-year high of 9.4% as fuel prices rise

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Annual rate in June up from May’s 9.1% figure and exceeds analysts’ expectations

Rising petrol and diesel prices for motorists and dearer food pushed Britain’s annual inflation rate to a fresh 40-year high of 9.4% last month.

Figures from the Office for National Statistics showed the government’s preferred measure of the cost of living – the consumer prices index – was up from May’s 9.1% figure.

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Rishi Sunak ‘wasted £11bn by paying too much interest’ on UK debt

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Labour accuse chancellor of wastefulness for failing to insure against interest rate rises

Rishi Sunak has been accused of wasting £11bn of taxpayers’ money by paying too much in interest servicing the government’s debt.

The National Institute of Economic and Social Research (NIESR) said the losses were the result of the chancellor’s failure to insure against interest rate rises on £900bn of reserves created through the quantitative easing (QE) programme.

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Boris Johnson claims planned Northern Ireland protocol law is ‘insurance’ in case talks fail – live

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Latest updates: UK prime minister meets Sinn Féin and DUP as Mary Lou McDonald suggests forming Stormont assembly is not UK government priority

This is from my colleague Jennifer Rankin in Brussels on the UK government’s mixed messaging over the Northern Ireland protocol.

Taoiseach Micheál Martin and Sinn Féin’s leader in Northern Ireland, Michelle O’Neill, have said they recognise there are “serious issues” in relation to the implementation of the Brexit protocol that Boris Johnson is planning to override in part.

They expressed serious concern about possible unilateral moves on the protocol by the British government, which would have a destabilising impact on Northern Ireland.

They recognised that there are genuine issues regarding aspects of the implementation of the protocol but these can be taken forward in the context of EU-UK discussions.

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‘Apocalyptic’ food prices will be disastrous for world’s poor, says Bank governor

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Bank of England’s Andrew Bailey blames UK’s highest inflation rate for three decades on Russia-Ukraine war

The Bank of England governor has blamed the war in Ukraine for the highest inflation in the UK for three decades and warned that “apocalyptic” food prices caused by Russia’s invasion could have a disastrous impact on the world’s poor.

Giving evidence to MPs, Andrew Bailey said while he was unhappy about the level of price rises, 80% of the inflation overshoot was caused by factors outside the Bank’s control.

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