By Jeffrey Smith
Investing.com – The Bank of England said it would not hesitate to raise interest rates as needed, and was quick to reassure markets frightened by the plans of Prime Minister Liz Truss’s new government.
Truss’ chief financial officer, Kwasi Quarting, unveiled the biggest tax cuts in 50 years in a bid to kick-start growth in an economy stymied by the energy crisis as well as the after-effects of Brexit and the COVID-19 pandemic.
However, markets viewed the plans as unsustainable and inflationary, sending the pound to an all-time low against the dollar, driving up government bond yields. The price dropped to $1.034 earlier on Monday and then climbed higher. It fell 1.6% to $1,067 in recent trading.
“The [Monetary Policy Committee] “It will not hesitate to change interest rates as necessary to bring inflation back to the 2% target sustainably over the medium term, in line with its mandate,” the bank said in a statement.
It reiterated that it would “make a full assessment at its next scheduled meeting on the impact of government announcements on demand and inflation, and the fall of the pound, and act on that basis.”
The next meeting of the Monetary Policy Committee is scheduled for November.