Despite the worsening economic outlook, the Bank of England’s chief economist, Huw Pill, still believes that there is a major need for a “significant” base rate rise next month.

Speaking at the Scottish Council for Development and Industry in Glasgow yesterday, Pill, who joined the MPC just over a year ago, also reiterated the Bank’s commitment to returning inflation to its 2% target.

He said: “At present, I am still inclined to believe that a significant monetary policy response will be required to the significant macro and market news of the past few weeks. But I will see when we get to November how events have evolved in the meantime.”

Pill also said that new independent forecasts from the Office for Budget Responsibility, which will be released alongside the chancellor’s budget plans on 31 October, will “bolster the credibility of the process, thereby helping to add stability in what is a volatile environment at present”.

The lack of an independent assessment by the fiscal watchdog was a key reason why Kwasi Kwarteng’s recent mini-budget of tax cuts sparked turmoil on financial markets, and in the mortgage market.

The UK central bank has already hiked interest rates at each of its last seven meetings, with the bank rate currently at 2.25%.

It has also brought quantitative easing (QE) to an end, and started to run down its holdings of gilts accumulated for monetary policy purposes.

Reflecting on the Bank’s decision to intervene in the bond markets two weeks ago, he added: “In the face of dysfunction that has emerged in some specific market segments in recent weeks, the Bank is conducting a set of temporary and targeted financial stability operations to support the gilt market. Their goal has been to permit an orderly deleveraging of positions held by so-called liability driven investment (LDI) funds, which became vulnerable in the volatile market conditions we have seen of late.

“In taking this action, the Bank has sought to prevent the emergence of a self-sustaining vicious spiral of collateral calls, forced sales and disappearing liquidity from emerging in a core segment of the financial markets. Restoring market functioning helps reduce any risks from contagion to credit conditions for UK households and businesses.”