However, committee members will have to make the decision without any guidance from the government about its tax and spending policies after chancellor Jeremy Hunt pushed back the date for the fiscal event scheduled for 31 October to 17 November.
Hunt had been expected to set out his ‘Medium Term Fiscal Plan’ next week – before the MPC meeting – in a bid to rebuild confidence in the economy after former chancellor Kwasi Kwarteng’s disastrous mini-budget in September and prime minister Liz Truss’ subsequent resignation.
But Hunt will now reveal his plans on 17 November in the form of an ‘Autumn statement’.
The last interest rate rise – from 1.75% to 2.25% in September – took place on the eve of the mini-budget. A lot has happened since then. The pound fell sharply then the Bank of England was forced to intervene in the bond markets after a large-scale sell-off. The uncertainty led to many major mortgage lenders withdrawing or re-pricing mortgage products.
However, the scrapping of the mini-budget policies and Rishi Sunak’s appointment as prime minister have gone some way to calm mortgage and economic volatility.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Since the reversal of the mini-budget, the case for additional interest rate rises has diminished, as the Treasury is no longer pushing in the opposite direction to the Bank of England. Make no mistake, interest rates are going up from here, but the government’s climb down from the inflationary policies of Trussonomics means the bank won’t have to slam down on the brakes quite as hard.
“In terms of the immediate policy decision, the market is now pricing in a 0.75% interest rate rise at the next meeting. The delay to the new chancellor’s fiscal statement will probably encourage the bank’s rate-setters to be cautious with their November interest rate hike, because they’ll still be missing a big part of the economic picture. The bank can always then adjust monetary policy at the December meeting if needed, when the full scope of the government’s fiscal plans will be laid bare by the Autumn Statement.”
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