The Brexit referendum of a decade ago demanded cool heads. 

The grown-up in the room was Mark Carney, governor of the Bank of England at the time. 

At an impromptu press conference, Carney, now prime minister of Canada, reaffirmed that the Bank was ready to do whatever was necessary to uphold financial stability.

His successor at the bank, Andrew Bailey, faces a similar, if less epoch-making, decision next week. 

By coincidence, the outcome of the Bank’s interest rate-setting meeting will be revealed as voters go to the polls in Makerfield. If Andy Burnham wins, it will trigger a contest for the next prime minister and could see Chancellor Rachel Reeves bundled out of the Treasury. 

The mayhem in the Labour Party, exacerbated by John Healey’s departure from Defence, layers political uncertainty on top of geoeconomic stress from conflict in the Arabian Gulf. Rate-setters will also find it hard to ignore events in the financial markets. 

The SpaceX mania and the upcoming initial public offerings for Anthropic and OpenAI all point to an AI bubble. Some of the most terrifying events in stock market history – the Crash of 1929 and ‘Black Monday’ in 1987 – were triggered by disputed interest rate rises. 

The energy price shock caused by the war in the Gulf led the European Central Bank to become the first G7 central bank to raise rates. At its Thursday meeting, it raised its key rate by a quarter of a percentage point to 2.25 per cent and hinted at a further rise in July. 

The Bank of Japan is set to raise its policy rate from 0.75 per cent to 1 per cent, taking it to the highest level in 31 years. 

Next week will see both the US Federal Reserve, under the leadership of new chair Kevin Warsh, and the Bank of England make rate judgments. 

Warsh was chosen by President Trump because of his predilection for keeping rates low. But when the facts change, he may change. 

The US labour market is robust, with payrolls rising on average by 188,000 a month since March. Consumer prices jumped 4.2 per cent in May, changing the calculus.

Warsh, paradoxically, could soon find himself applying the brakes. The picture is different in Britain. Misplaced tax and employment policies have led to a surge in joblessness. 

After a buoyant start to the year, output went into reverse in April, falling 0.1 per cent.

Forecasters predict a low-octane second quarter. Worryingly, inflationary expectations – critical for Britain’s rate-setters – are on the up, climbing to 4 per cent in May from 3.2 per cent. 

That is not surprising given references by government ministers to the cost-of-living crisis. Ahead of the Iran war, two UK rate cuts, from 3.75 per cent, were on the horizon this year. 

That clearly is off the table. Lower borrowing costs, as this column has argued, would boost housing, consumption and business investment. They would offset baked-in-the-cake tax increases. 

That is now the least likely outcome. The Bank was slow to raise rates in 2022 after Russia’s invasion of Ukraine. The inflation genie was out of the bottle, and prices rocketed to a peak of 11.1 per cent that October. 

Bailey’s plodding approach is usually to wait and see. The tide is moving to higher rates across the G7, and rate-setters may well feel they have little choice but to act soon. Not to do so would risk a run on the pound, exacerbating the inflation threat.