[Jimbuna]

Mini-budget will likely mean higher interest rates, warns Bank of England governor

UK borrowers can expect to face higher interest rates as a result of the Truss government’s tax and spending decisions during its six weeks in power, the governor of the Bank of England has warned.

Despite the U-turn on corporation tax on Friday that saw the sacking of Kwasi Kwarteng as chancellor, Andrew Bailey said the extra stimulus provided in last month’s mini-budget would add to inflation and force the Bank into tougher-than-expected action.

Bailey said he had impressed on the new chancellor, Jeremy Hunt, the need for the public finances to be sustainable and that there had been a “clear and immediate meeting of minds”. Hunt used his first interview to stress mistakes made by Truss would require “difficult decisions” to be made.

The governor said it was not for him to “constrain the choices” Hunt will make in his fiscal statement on 31 October, and said the decision to go ahead with the planned increase in corporation tax was “important”.

Even so, Bailey made clear that tough action from the Bank on borrowing costs could be expected in early November.