BoE to refrain from raising rates urgently, ‘strong’ action expected in November

by Jonathan Cable

LONDON, Sept 30 (Reuters) – The Bank of England (BoE) will not raise rates until its next monetary policy meeting on November 3, at which it is expected to raise its main benchmark rate by 75 basis points , say economists polled by Reuters.

The central bank intervened on Wednesday to try to stem the fall in the prices of government bonds and the pound – caused by the presentation of the government’s budgetary plans – by announcing that it would buy as many British bonds as necessary during the the next two weeks.

Twenty-six of 30 economists polled by Reuters between September 27 and 30 said there was little or very little chance of the bank raising its key rate before its next meeting.

“A rate hike between meetings would be a sign of panic and an indication that the central bank is not in control of its policy,” said Brian Martin at ANZ.

The pound sterling fell to its lowest level against the dollar on Monday, three days after the presentation of a fiscal stimulus plan which worries investors.

The BoE was one of the first major central banks to start tightening monetary policy in the face of rising prices. Its base rate currently sits at 2.25%, down from a record low of 0.1% when the pandemic sent panic through global markets.

Nineteen of 36 economists surveyed said the institution would raise its rate by 75 basis points in November, while 13 said it would go for a 100 basis point hike. Three people said the BoE would proceed with a “limited” half-point hike, as it has done in its past two meetings.

The participants in the survey recommend a rate hike of 100 basis points in November, according to the median of the responses. Two of the 20 respondents said the central bank should go even further, with a hike of 150 basis points.

The median of the responses indicates that the bank rate will peak at 4.25% in the first quarter of 2023, compared to 3% previously expected. (Reporting Jonathan Cable; poll by Maneesh Kumar, Vijayalakshmi Srinivasan and Susobhan Sarkar, French version Laetitia Volga, editing by)