Biggest Interest Rate Rise For 25 Years Could Spell Showdown At The Bank

18th September 2022

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.

City economists reckon a 0.5 percentage point rise will be the bare minimum, up from the current level of 1.75%, in a seventh consecutive rate rise - the most aggressive tightening cycle since at least 1997 when Gordon Brown's first act as chancellor handed the Bank independence to set borrowing costs.

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