The massive power bill rescue by Prime Minister Liz Truss has given the Bank of England (BoE) a temporary relief in its fight against inflation, but it still appears that interest rates will increase significantly later in September 2022. The BoE’s policy decision was postponed from September 15 to September 22, 2022, owing to the National Day of Mourning following the passing away of Queen Elizabeth II. Nonetheless, it indicated that the week-long wait could affect the policy outlook. The rate of consumer price inflation increased significantly during 2017–22, according to GlobalData.
A rate increase of 50 basis points is expected in September 2022. Only twice since 1995 has the BoE hiked the bank rate by 50 basis points, matching the increase in August 2022. The cap on tariff and anticipated tax cuts could lead to inflationary pressure in the future since households would be thousands of pounds better off than they otherwise would have been. The rate hike by the BoE could be higher than that expected initially to counter inflation.
Huw Pill, the chief economist at the BoE, said early in September 2022 that the bank would make sure that government spending did not lead to inflation. The BoE could delay its rate hikes in 2023 longer than other central banks. It could consider rate cuts considerably slower than the US Fed or some of the other central banks that will likely do so by the middle of 2023.
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