Bank of England pauses interest rate announcement over Queen's death

Economists expect a 50 to 75 basis point increase

The Bank of England (BoE) has paused its decision on interest rates by one week due to the national period of mourning for Queen Elizabeth II, who died Thursday.

The postponement marks the first delay of the U.K. rate-setting body since the central bank became operationally independent 25 years ago.

The BoE will announce its rate decision on Sept. 22.

Economists mostly expect the central bank to raise interest rates by another 50 basis points, although some in financial markets expect an even bigger hike of 75 basis points. One basis point equals 1/100 of one percent.

AJ Bell financial analyst Danni Hewson told FOX Business: "Bank of England Monetary Policy Committee members are unlikely to be forced off course by the delay to the rate-setting meeting, and whilst there’s clearly an expectation the energy price freeze will help to cool inflation, the Bank is still expected to be aggressive when it comes to its next rate decision. It needs to maintain credibility, particularly in the wake of the European Central Bank’s recent unprecedented hike."

electric lines

Electricity pylons hold power cables leading away from the SSE (Scottish and Southern Energy) gas-fired Keadby Power Station near Scunthorpe in northern England. (LINDSEY PARNABY/AFP via Getty Images / Getty Images)

In August, the BoE lifted its bank rate by 50 basis points to 1.75% by a vote of 8-1. The central bank cited inflationary pressures and a slowdown of economic growth.

Several analysts expect U.K. inflation to peak at 11%, tempered by a tariff cap on energy prices announced by new Prime Minister Liz Truss on Thursday.

The "Energy Price Guarantee" will mean a typical U.K. household will now pay up to an average 2,500 pounds sterling ($2,875) a year on their energy bill for the next two years. This cap is automatic and applies to all households.

Hewson told FOX Business that although parliament will be suspended for a number of days, the new cost of living plan will be rolled out behind the scenes providing a safety net for cash-strapped households. 

James Smith at ING said the price cap cushion for household finances — plus a further boost from tax cuts promised by Truss — could mean the BoE will wait longer before reversing its rate hikes than other central banks.

"It probably means they're going to be looking at rate cuts much less urgently than the Fed or some of the other central banks which might be cutting rates by the middle of next year," Smith said.

Nord Stream 2

Pipes at the landfall facilities of the Nord Stream 2 gas pipeline are pictured in Lubmin, northern Germany, on Feb. 15, 2022. Stream 2 is a 764-mile natural gas pipeline under the Baltic Sea, running from Russia to Germany's Baltic coast. (AP Photo/Michael Sohn, File / AP Newsroom)


Wholesale natural gas prices nearly doubled since May, due to Russia’s restriction of gas supplies to Europe and the risk of further curbs.

The rise in energy prices slowed growth.

"The United Kingdom is now projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative," the BoE said in August.

Samuel Tombs of consultancy Pantheon Macroeconomics said the recession forecast by the BoE might be narrowly avoided, clearing the way for a half-percentage point rate hike at the next meeting and another in November.

That would take the bank rate to 2.75%, its highest since 2008, where Tombs thought it would remain, a long way below bets in financial markets of more than 4%.

UK 50 pound note featuring Queen Elizabeth

A U.K. 50 pound note featuring Queen Elizabeth II (Bank of England)


Queen Elizabeth II was the first monarch to be featured on Bank of England banknotes, which will continue to be legal tender. A further announcement regarding existing Bank of England banknotes will be made once the period of mourning has been observed.

Reuters contributed to this report.