Bank of England 'won't hesitate' to raise interest rates to control inflation

ITV News' Deputy Political Editor Anushka Asthana brings us the latest after the pound hit a record low against the dollar

The Bank of England has said it "will not hesitate" to change interest rates in order to get inflation under control.

The Bank released a statement on Monday after the pound plummeted to a record low of $1.03.

It has since recovered slightly but is still at a near all-time low.

The statement said: "The MPC (Monetary Policy Committee) will not hesitate to change interest rates as necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit."

They appeared to rule out an emergency meeting to raise interest rates immediately, instead stating "it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the Government’s announcements, and the fall in sterling, and act accordingly."

The statement welcomed the chancellor promising to announce a "medium-term fiscal plan" on November 23 to ensure the deficit does not spiral out of control.

Markets reacted with alarm to Chancellor Kwasi Kwarteng's mini budget on Friday which introduced sweeping tax cuts, which were largely seen as favouring the rich.

The budget came at a time when the government was already preparing to ratchet up spending massively to tackle the energy crisis.

Mr Kwarteng's mini-budget also did not come with an analysis by the Office for Budget Responsibility (OBR), which usually provides a frank assessment on the impact of planned government spending.

The London stock exchange had closed when the statement was released, so remained unchanged.

Earlier, Downing Street made clear that the government would not be deflected from its tax-cutting agenda by the reaction of the markets.

This led to fears of unfunded spending fuelling more debt, sending the pound into turmoil at a time the dollar is remaining strong.

The pound's nosedive is sparking fears the currency could hit parity with the dollar for the first time in history.

Mr Kwarteng has now asked the OBR to deliver an assessment of his tax and borrowing plans on the same day as his fiscal plan.

The fiscal plan comes weeks after the BoE's next scheduled interest rates meeting on November 3.

ITV News's Politics Editor Robert Peston said the BoE's statement was an "unprecedented emergency warning that interest rates will rise very significantly after last week’s fiscally loose mini-budget."

But Mr Kwarteng has defended his economic package, disputing that it would only benefit the wealthy and arguing that it will “turn the vicious cycle of stagnation into a virtuous cycle of growth”.

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The chancellor told BBC’s Sunday With Laura Kuenssberg programme that the cuts “favour people right across the income scale” and insisted he is “focused on tax cuts across the board”.

Prime Minister Liz Truss previously said her government was “incentivising businesses to invest and we’re also helping ordinary people with their taxes”.

Labour has accused the government of "fuelling inflation with tax" and said the pound falling is a reflection on the chancellor's mini-budget, warning it will "have repercussions for all of us and our standard of living".

Shadow Chancellor Rachel Reeves warned the government could not afford to wait until November to set out its plans, and that the public needed reassurance now.

“It is unprecedented and a damming indictment that the Bank of England has had to step in to reassure markets because of the irresponsible actions of the government,” she said.

Speaking at a fringe meeting at Labour’s conference, she hit out at the chancellor over any delay: “Is he looking at what is happening on the financial markets? Has he noticed the reaction to his fiscal statement on Friday?

“It is grossly irresponsible.”