Rachel Reeves probably doesn’t need any reminders of the political and economic power of inflation.
Her party’s landslide electoral victory in the summer was largely attributed to the presidential election Cost of living calamity.
Donald Trump wins this week He highlighted this point, as his sweeping gains across all demographics are due to inflationary effects on the economy. Biden The administration was unable to suppress it in time for polling day.
In this context, the Bank of England Ruling that its first budget was inflationary This is likely to further damage the credibility of its first financial intervention.
The bank expects a half-percentage-point increase at peak inflation, a one-year extension in the return to a sustainable rate of 2%, and slower-than-expected interest rate cuts, all flowing from the red box.
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Their forecasts also highlight a three-quarter point increase in growth, all of which are broadly consistent with those already set by the Office for Budget Responsibility.
What the budget does not do is change the overall picture of inflation, as seen by the nine members of the Monetary Policy Committee and the governor, who takes political neutrality for granted.
Declining inflation is the trend, and while some effects remain, leading to today’s interest rate cut, the trend in prices and interest rates is downward.
“There has been continued progress in reducing inflation, especially as previous external shocks have subsided, although residual domestic inflationary pressures are declining more slowly,” the MPC says.
Generally similar story
Surprisingly, when it comes to future interest rate cuts, his language is similar to that used after his last meeting, where interest rates were held at 5%.
“Based on evolving evidence, a gradual approach to removing political restrictions remains appropriate,” she added.
This means that consumers should look forward to lower prices over time.
Rachel Reeves hopes they’re right.