Noting that the Bank of England (BoE) is following developments in financial markets very closely in light of the significant repricing of financial assets, the Monetary Policy Committee will not hesitate to adjust interest rates as necessary to return inflation to the 2 percent target in a sustainable manner in the medium term, in line with its mandate. announced.
In the statement of BoE Chairman Andrew Bailey, which is available on the bank’s website, it was noted that the bank follows developments in the financial markets very closely in light of the significant repricing of financial assets.
Reminding that the British government has issued a series of important announcements in the past weeks, the statement said, “The Government’s Energy Price Guarantee (holding household energy bills flat for two years) will reduce the short-term peak (expected peak) in inflation” it said.
In the statement, which stated that the commitment of the British government to sustainable economic growth was welcomed, the following evaluations were included: “The role of monetary policy is to ensure that demand does not outpace supply, leading to further inflation in the medium term. As the Monetary Policy Committee has made clear before, at its next scheduled meeting, the Committee will make a full assessment of the impact of the government’s statements on demand and inflation, and the decline in the pound, and act accordingly. In line with its mandate, the Monetary Policy Committee will not hesitate to adjust interest rates as necessary to sustainably return inflation to the 2 percent target over the medium term.”
Historic drop in sterling
The British pound hit an all-time low of 1.0350 in Asian markets this morning.
Finance Minister Kwasi Kwarteng said on Friday that the country is preparing to implement tax cuts totaling £45 billion. This situation increased the expectations that the country’s external debt would increase and caused the sterling to lose strength.
Analysts predict that the BoE will continue to increase interest rates in the coming period in order to control inflation.
The Central Bank had increased the policy rate by 50 basis points to 2.25% last week.
Inflation in the country is currently at 9.9 percent, the highest level in the last 40 years.