Huw Pill, the Bank’s chief economist, said yesterday that they “cannot be indifferent” to the developments of the past few days, in a signal that interest rates will rise again to keep a lid on inflation.

“It is hard not to draw the conclusion that all this will require significant monetary policy response,” Mr Pill said in a speech to the Barclays-CEPR International Monetary Policy Forum.

“We must be confident in the stability of the UK’s economic framework,” he added.

Britain's Chancellor of the Exchequer Kwasi Kwarteng holds a folder reading "The Growth Plan 2022" as he walks out of Number 11 Downing Street on his way to unveil an anti-inflation budget plan in London on September 23, 2022. - The UK's new government will unveil multi-billion-pound measures aimed at supporting households and businesses hit by the highest inflation in decades. (Photo by Daniel LEAL / AFP) (Photo by DANIEL LEAL/AFP via Getty Images):Kwasi Kwarteng

Meanwhile Sir Charlie Bean, the former deputy governor of the Bank’s monetary policy, called for an emergency meeting in light of the economy’s current state.

Asked about the economic turmoil this could cause, he told BBC Radio 4’s Today Programme: “The key thing is, if you call it, you have to take significant action.”

“The lesson is you go big and you go fast,” he added.

Sir Charlie also warned: “It now costs the UK Government more to borrow than Italy or Greece, who we have traditionally thought of as being not quite basket cases, but certainly weaker-performing sovereign entities.”

The pound’s performance, which saw it fall to its lowest ever value against the dollar on Monday before recovering slightly yesterday, has prompted wide-spread concern by Tory MPs, including those who backed Rishi Sunak’s assessment that Liz Truss’ economic policies would drive up inflation.

“Those of us who backed Rishi Sunak lost the contest but this poll suggests that the victor is losing our voters with policies we warned against,” Huw Merriman, chairman of the Transport Select Committee, tweeted on Monday night.

“For the good of our country, and the livelihoods of everyone in our country, I still hope to be proven wrong.”

Appearing on BBC Radio 4’s World At One programme, yesterday, Mel Stride, the chairman of the Treasury Committee, said: the bit that I do have some issues with, I have to say, is unfunded tax cuts of the kind of order that we’re looking at here and that really I think is the part that has spooked the markets, because those tax cuts have got to be paid for.”

George Osborne, the former chancellor, urged the government to stop its “schizophrenic” policy of “borrowing your way to a low-tax economy”.

The reaction from mortgage lenders has been disastrous news for many would-be borrowers.

Lending giants yesterday hiked their mortgage rates and removed products, with HSBC announcing that it had removed its “new business” residential and buy-to-let products from sale.

Britain’s biggest building society, Nationwide, said that from Wednesday, it will increase its two, three, five and 10-year fixed-rates by between 0.90 and 1.20 percentage points.

Sir Keir Starmer in his speech yesterday at Labour conference said that the Government had lost control of the British economy and crashed the pound.

“Higher interest rates. Higher inflation. Higher borrowing. And for what?” he said to a packed hall in Liverpool.

“Not for you. Not for working people. For tax cuts for the richest 1% in our society.

“Don’t forget. Don’t forgive.”

At a meeting on Tuesday with institutional investors, the Chancellor reaffirmed his intention to get debt falling as a percentage of GDP alongside a projection by the OBR in November.

“We are confident in our long-term strategy to drive economic growth through tax cuts and supply side reform,” he told them.

Calls for 'emergency intervention' over the economy