Bank will 'not hesitate' to raise interest rates after pound's fall

Image source, Getty Images

After the pound fell to a record low against the dollar, the Bank of England said it would raise interest rates.

In November, the Bank will change them by as much as needed.

After the Treasury said it would publish a plan to tackle debt, it issued a statement.

After the two statements, the pound fell again.

All mortgage products that come with a fee will be temporarily withdrawn by the largest mortgage lender in the United Kingdom.

Virgin Money and Skipton Building Society have stopped selling mortgage products.

The current cost of new mortgage deals is expensive because of a rise in the cost of long-term borrowing, according to experts.

The British pound fell to an all-time low against the US dollar after the Chancellor pledged more tax cuts at the weekend.

The pound had fallen as global markets reacted to the increase in government borrowing.

A weak pound makes it more expensive to buy goods imported from other countries. The cost of imports of commodities in dollars is higher.

The Bank of England was expected to hold an emergency meeting in the coming days to raise interest rates in order to stem the fall in the value of the pound.

The Bank of England said it was keeping a close eye on developments in financial markets and would make a full assessment at its next meeting.

The tax cuts announced in Friday's mini-budget are expected to cause interest rates to double to 5.8% by the spring of next year, according to investors.

The government's decision not to publish a forecast of expected UK growth and government borrowing from an independent forecaster has been linked to the market's volatility.

Martin Weale, Professor of Economics at King's College London and former member of the Bank of England's Monetary Policy Committee, said that people are concerned that the government has no plan for controlling the national debt.

Market traders have been frightened by the government's policies, and I think they got further frightened by the idea that this was only the first part of tax cuts.

Full growth and borrowing forecasts from the Office for Budget Responsibility will be included in the government's financial plan.

Further details on the government's spending rules will be set out.

Paul Dales, chief UK economist at Capital Economics, said that given the pound had fallen back since the statements from the Bank and the Treasury the markets may need more reassurance.

There was a double dose of reassurance from the Bank of England.

There is a timetable with dates attached. Cabinet ministers will make statements about the ideas we heard on Friday.

There was a parliamentary moment in just under two months. The "Medium Term Fiscal Plan" is what the Office for Budget Responsibility is calling it.

Don't panic, we know what we're doing, that's the message the Treasury is trying to convey.

Let's see what happens.