When is the Bank of England interest rate decision and what is going to happen?

The Bank of England is going to deliver its interest rate decision today against the backdrop of a shock rise in inflation and a now becalmed banking mini-crisis.

Before Wednesday’s surprise increase in inflation to 10.4 per cent, there was speculation about whether the Bank’s decision making body, the Monetary Policy Committee (MPC) would raise rates in wake of the collapse of Credit Suisse, and buy-out of Silicon Valley Bank.

Analysts have suggested now that since the inflation increase, a rate rise is quite likely, making it the 11th consecutive increase.

This comes after it was reported that nearly every sector of the UK economy is powering away from a recession that was much-tipped at the turn of the year.

Some 11 of the 14 sectors monitored by Lloyds Bank are producing more than they did a month ago, the highest number in nearly a year.

The decreasing likelihood of a recession means a greater chance for growth, higher wages and sticky inflation, which could contribute to the Bank of England looking to increase interest rates again.

Last night, the FTSE 100 was treading water in anticipation of the US Federal Reserve decision and today’s Bank of England decision.

It had a bumpy start to the day but managed to make gains in the afternoon, led by retailers like Ocado and B&M and natural resources.

The blue-chip index closed 30.62 points higher, or 0.41 per cent, at 7,566.84.

US markets started the day trading slightly on the backfoot amid investor nervousness ahead ofthe rates decision.

The S&P 500 was down 0.2 per cent and Dow Jones was 0.25 per cent lower when European markets closed.

When is decision and will rates definitely go up?

The Bank of England is going to make its decision at 12pm on Thursday 23 March, and you can find out all the latest news, analysis and reaction on cityam.com. Follow our Economics Editor on social media, @_JackBarnett.

It is looking increasingly likely that the Bank of England will increase rates, after the US Federal Reserve looked past the ongoing wobbles in the global banking system and hiked rates for the ninth time in a row, extending its aggressive fight against inflation.

Chair Jerome Powell and the rest of the federal open market committee (FOMC) bumped the world’s most important interest rate 25 basis points higher to a range of 4.75 per cent and five per cent.

Powell and co’s resolve to keep inflation down sets the scene for Bank of England Governor Andrew Bailey and his team of rate setters, who will announce their rate decision at midday tomorrow.

Markets reckon the monetary policy committee (MPC) will also kick UK interest rates 25 basis points higher to a post-financial crisis high of 4.25 per cent.

How are the Bank of England approaching their decision?

Bank of England governor Andrew Bailey has insisted that the UK’s banking system is robust, but admitted that any “lasting impact” on bank funding costs could dent the nation’s financial stability.

It follows the failure of the US’s Silicon Valley Bank (SVB) and Signature Bank, after they could not raise the funds needed to pay savers rapidly withdrawing money from the banks.

SVB’s UK business was rescued by HSBC in a sale costing just £1 earlier this month.

In a letter to the Treasury Committee ahead of Thursday’s interest rate decision, the Bank’s governor Andrew Bailey stressed that the UK remains separate from the US’s banking woes.

Mr Bailey said: “The loss of confidence in, and material deposit outflows from, SVB UK was ultimately due to problems faced by its US parent.

“The UK banking system continues to be resilient, maintaining robust capital and strong liquidity positions.”

Bailey pointed out that UK banks have less dependence on certain bonds than US banks and have a more diverse range of depositors, unlike SVB which was focused on lending to the technology and innovation sector and had a large portfolio of long-dated bonds.

He added: “Direct exposures of UK banks and insurers to other US regional banks are negligible. SVB was the only US regional bank with a UK footprint.”

Nevertheless, the Bank cautioned that more volatility in the financial markets, particularly the recent sharp drops in the share prices of banks, could expose weaknesses in the UK’s financial system.

The letter read: “There remain channels through which UK financial stability could be affected, including any lasting impact on bank funding costs and the potential for those to increase the cost of borrowing for UK households and businesses.

“And should elevated market volatility and sharp moves in asset prices persist, it could trigger the crystallisation of vulnerabilities in market-based finance previously identified by the Financial Policy Committee.”

The SVB collapse and wider banking woes highlight the importance of making sure banks are well capitalised against risks from changing interest rates, Mr Bailey said.

The Bank’s Monetary Policy Committee is due to deliver its latest interest rate decision on Thursday.

Press Association – Anna Wise