London no longer has a monopoly on central bank interest rate discussions! The Bank of England is about to “go north” to Leeds, and the market is betting on returning to the trajectory of interest rate hikes in November

The Zhitong Finance App learned that in line with the current political climate, nine members of the Monetary Policy Committee will head north to the Bank of England's office in the West Yorkshire city of Leeds to discuss and finalize interest rate decisions, opening a new chapter for this central bank with a history of 332 years. According to a person familiar with related discussions, the first meeting of the Monetary Policy Committee in the North may be scheduled as early as December, but it is more likely to be held at the same time as the vote on March 18 next year.

The central bank's latest trend can be described as being linked to the Bank of England's long-term plan to expand its northern office layout, helping to strengthen its ties with regional enterprises, talents, and economic activities.

As of September 22, GBP/USD was reported to be around 1.3366, near a two-month low; previously, signals from the Federal Reserve's interest rate hike and further policy tightening supported the US dollar, but the Bank of England remained on hold for the time being. According to reports, the probability that the Bank of England will return to raising interest rates in November, which is currently factored in by money market traders is about 65%, and a cumulative rate increase of about 4 times, 25 basis points each time until the end of 2027 is taken into account.

The recent common thread of major central banks is to prevent ongoing price shocks from evolving into broader and more enduring inflation, and at the same time adjust their policy strength according to their respective economic conditions. The Federal Reserve unanimously decided to raise interest rates by 25 basis points on September 16, raising the federal funds rate target range to 3.75% — 4.00%. Its judgment is based on domestic demand, capital investment, and employment remaining resilient, while inflation is still high.

The ECB announced an interest rate hike of 25 basis points on September 10, and the deposit mechanism interest rate was raised to 2.50%, focusing on dealing with continued energy inflation brought about by the Middle East conflict. The Bank of Japan, on the other hand, passed a 7-2 interest rate hike decision on September 18, raising the policy interest rate to 1.25%, which took effect on September 24; the depreciation of the yen, rising prices of energy and some AI-related commodities, and the transmission of wage costs to sales prices have all raised its concerns about rising inflation.

The Bank of England took a more prudent pace: the decision announced on September 17 showed that the Monetary Policy Committee maintained interest rates at 3.75% at 6-3, and three other members advocated a 25 basis point increase in interest rates. The UK inflation rate rebounded to 3.1% in August, but the labor market is still weak, and there is no obvious second-round inflation effect in wage and price settings, so most members chose to continue watching. From the perspective of policy transmission, interest rate hikes mainly prevent energy price increases from solidifying further into a continuous rise in wages and service prices by restraining demand and stabilizing inflation expectations; differences in the economic affordability, cost transmission speed, and financial conditions of various countries determine the differences in the pace of this round of anti-inflation actions.

From Needle Street to Leeds, the Bank of England interest rate decisions will no longer always be made in London

With the exception of teleconferences during the COVID-19 pandemic, UK interest rate policymakers have gathered in London to make decisions every time since the Bank of England gained independence in monetary policy. Starting next year, this “old woman from Sewing Street” will have London and Leeds share this responsibility.

In line with the current political climate, nine members of the Monetary Policy Committee will head north to the Bank of England's office in the West Yorkshire city of Leeds to discuss and finalize interest rate decisions, opening a new chapter for this 332 year old central bank. According to a person familiar with related discussions, the first meeting of the Monetary Policy Committee in the North may be scheduled as early as December, but it is more likely to be held at the same time as the vote on March 18 next year.

The Monetary Policy Committee's decision to embark on this symbolic journey coincided with Prime Minister Andy Burnham's push to shift policy focus to northern England, including the establishment of the “North Office at 10 Downing Street” in Manchester; he was mayor there for nearly ten years. However, the Bank of England has been linked to Leeds for a long time, and the first local branch was opened as early as 1827.

In 2021, when Burnham became prime minister was still a distant idea for the majority of British voters, the Bank of England announced plans to establish a northern center and moved into a larger office two years later, with the goal of expanding the team to 500 people by 2027. Earlier this week, the Bank of England said it will move into a new office in the Capitol Building in Bond Yard in 2028 and continue to advance plans to let one-tenth of its employees work in this city.

According to the relevant plan, the Monetary Policy Committee will only meet in Leeds during the interest rate decision meeting, which does not release the full economic forecast at the same time, because the meeting to release the full economic forecast requires more reports from the London office staff. The Monetary Policy Committee meets eight times a year, four of which release new forecasts simultaneously.

Monetary Policy Committee members regularly travel to various parts of the country to learn about the economic situation from companies and other contacts, and supplement the information they have obtained through the central bank's regional representative network. Until now, however, interest rate decisions have only been made in the Bank of England's committee room in a historic building in the City of London, in a protected listed historic building.

When announcing the new office arrangement this week, Bank of England Governor Andrew Bailey said it was “an important milestone in our long-term commitment to the city.” West Yorkshire Mayor Tracy Brabin, a member of the Labour Party, said that the decision “is a strong recognition of our 'Northern Financial City' and also shows the country's confidence in the economic future of our region.”