Bank delays interest rate decision as UK mourns late Queen

Threadneedle Street postpones rate-setting meeting for a week in mark of respect for Elizabeth II

THE Bank of England has delayed a decision on whether to sharply increase interest rates and begin offloading its £838bn pile of government debt as the fight against inflation is put on hold following the death of Queen Elizabeth II.

Threadneedle Street said it would postpone the next announcement on rates by a week to mark a period of national mourning.

Economists are braced for an increase of as much as 0.75 percentage points to counter surging prices, the biggest rise since Black Wednesday in 1992. The Bank is also thought likely to announce that it will start offloading the government bonds it bought during previous crises within weeks, in a process known as quantitative tightening.

A verdict from the Monetary Policy Committee had been due next Thursday. But in an unprecedented move, the Bank said: “The committee’s decision will be announced at noon on Sept 22.”

The death of Britain’s longest-serving monarch has sparked a sharp scaling back of usual government business. Policy announcements have been paused for around 10 days, while the House of Commons will be suspended.

However, Downing Street sought to assure households that the mourning period would not impact Liz Truss’s decision to freeze average energy bills at £2,500.

The Prime Minister’s official spokesman said that the two-year energy price guarantee would be ready from Oct 1, as scheduled. The spokesman said: “We’re implementing that guarantee initially through private contracts with suppliers rather than through legislation, so this mourning period doesn’t impact that introduction.”

The delay in the interest rate decision will give policymakers more time to consider inflation and jobs data, which are expected to show price rises remained in double digits last month.

Speeches due to be delivered by Bank officials will also be delayed, while Kwasi Kwarteng, the Chancellor, is yet to announce when he will reveal an emergency financial package designed to shore up the economy.

The Treasury has indicated the event will go ahead this month, although the Office for Budget Responsibility (OBR), the Government’s tax and spending watchdog, will not be involved in producing an economic forecast.

The Bank is widely expected to raise interest rates for the seventh time in a row at its next meeting from 1.75pc, with some calling for sharp increases to keep a lid on inflation.

Officials have also indicated that reversing a ban on fracking is likely to be delayed by the death of the late Queen. The end of the moratorium on fracking – in place since 2019 – was meant to be achieved rapidly this week through the issuing of a written ministerial statement.

However, one Whitehall insider said there was no expectation any statement would be made imminently.

In a blow to the Prime Minister’s bid for energy independence, analysts also said fracking would amount to little more than a “cottage industry” in the UK. Citi said it doubted whether the UK had “all the ingredients” to develop a material shale gas industry given its relatively crowded countryside and fewer incentives for nearby residents.

Fracking involves extracting oil or gas from rocks by pumping in water and chemicals at high pressure.

The process drove an energy revolu- tion in the US, helping the country become a net exporter of oil in 2018 for the first time in decades.

Hopes for a boom in North Sea offshore exploration were even more doubtful, they added, given the basin has already been heavily drilled.