Rishi Sunak’s economic plan seems to be yielding positive results for the British economy, as the Bank of England (BoE) decided to halt interest rate rises after fourteen consecutive increases. This news comes as a boost to the British Prime Minister’s re-election chances, as it follows a week of better-than-expected economic indicators.
The Monetary Policy Committee of the BoE voted 5-4 in favor of pausing the tightening cycle, keeping the key lending rate unchanged at 5.25 percent. However, the central bank also mentioned that further rate hikes may still be necessary if inflation turns out to be higher than expected. This move suggests that the BoE, which is mandated to bring inflation down to 2 percent, sees an end to the long-standing issue of high living costs in Britain, which is likely to be a defining issue in next year’s election.
In response to the news, Chancellor Jeremy Hunt, Sunak’s top finance minister, stated, “We are starting to see the tide turn against high inflation, but we will continue to do what we can to help households struggling with mortgage payments.” This positive sentiment was further bolstered by the release of better-than-expected data on the cost of living the day before the BoE’s decision.
The consumer price index rose by only 0.3 percent in August, instead of the expected 0.7 percent increase. As a result, the headline inflation rate decreased from 6.8 percent to 6.7 percent. The data indicated that the UK might experience a temporary increase in inflation, which Chancellor Hunt had previously referred to as a “blip.”
Additionally, data released on Thursday morning revealed that public sector borrowing in August was lower than officially forecasted. The Office for National Statistics reported that public sector borrowing stood at £11.6bn last month, which is £3.5bn more than the previous year but below the £13bn forecast by the UK’s public finance watchdog. This unexpected increase in government revenue might encourage Tory MPs to press for pre-election giveaways in an attempt to sway undecided voters.
Sunak, who aims to restore the Conservative Party’s reputation for economic competence, has pledged to halve inflation and reduce debt. He commented on this week’s positive inflation news, stating, “Our plan is working. We have to stick to the plan to bring inflation down,” during an interview with the BBC. However, the opposition Labour Party believes that voters will assess the government’s long-term track record and will not overlook the chaotic budget under Sunak’s predecessor, Liz Truss.
Shadow Chancellor Rachel Reeves highlighted this point, stating, “Britain has been left worse off after thirteen years of economic chaos and instability under the Conservatives,” and adding, “Households coming off fixed-rate mortgages will be paying an average of £220 more a month, and inflation remains high because of the Conservatives’ disastrous mini-budget.”
As the UK heads towards the next election, the future of the economy will be a crucial factor in determining voters’ choices. Rishi Sunak’s economic plan and the recent positive economic indicators provide a glimmer of hope for a country that has been grappling with high inflation and economic uncertainty. However, the opposing Labour Party is quick to remind voters of the past and raise concerns about the stability of the current government’s economic policies. The coming months will undoubtedly shed more light on the state of the British economy and its impact on the political landscape.
More detail via POLITICO here… ( Image via POLITICO )