Bank of England delays decision on interest rates

Wednesday 14th September 2022 06:43 EDT

Following the death of Queen Elizabeth, the Bank of England has postponed a key decision on interest rates. It said that "in light of the period of national mourning", the Monetary Policy Committee's decision would now be announced on 22 September.

The Bank had widely been expected to increase rates last week. Economists had been predicting that the UK's central bank would raise rates to 2.25% - the highest level since December 2008.

Last month, the Bank raised interest rates by the highest margin in 27 years in an attempt to keep soaring prices under control. It also predicted that the UK economy would fall into recession later this year.

Higher interest rates can make borrowing more expensive, meaning people have less money to spend and prices will stop rising as quickly. However, some have question how effective UK rate rises can be when inflation is caused by global issues.

Energy prices climbed sharply when lockdown was lifted and the economy started to return to normal. They have increased further as Russia sharply cut its gas supplies to Europe. It has pushed up the price of gas across the continent, including in the UK, having a huge knock-on effect on consumers.

Speaking to the Treasury Committee last week, the Bank of England's governor, Andrew Bailey, defended its track record: "The person going to put the UK in recession is Vladimir Putin, not the MPC [Monetary Policy Committee]."

He also said the Bank would take Prime Minister Liz Truss's energy plan announcement "into account" when next deciding on interest rates. During her campaign, Truss hit out at the Bank of England, accusing it of being slow to react to rising prices and protect vulnerable households.

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