Well, at least Rishi Sunak is guaranteed to meet one of his five pledges this year – albeit the one which has the least to do directly with government policy. With his promise to “stop the small boats” more out of reach than ever today, the PM will try to seek solace in the fact he has fulfilled his pledge – early – to halve inflation by the end of the year.
UK inflation fell sharply in October to 4.6 per cent – its lowest rate in two years, according to ONS data out today. The bigger than expected drop – down from 6.7 per cent the month before – was largely driven by a fall in the energy price cap, which limits what suppliers can charge consumers per unit of energy. A fall in food inflation was another key factor.
According to economist Julian Jessop, headline inflation would in fact have dropped slightly further still had it not been for the recent increases in the price of petrol and diesel. These increases have now started to fall back, which we can expect to see reflected in the ONS’s November data.
Mortgage holders can feel hopeful that this good news on inflation is likely to rule out any further interest rate hikes. Though it may well be a while before the Bank of England starts to cut rates from their 15 year high of 5.25 per cent.
Hitting the inflation target will also pile Tory pressure on Jeremy Hunt to include some tax cuts in his imminent Autumn Statement.
Sunak will celebrate today’s data – though it is down to the Bank of England hiking rates and international conditions as inflation fades away, for now.
The Bank’s monetary tightening and global commodity prices are largely responsible for the rate of inflation. As economist Simon French points out, the UK government got too much criticism for its role in high inflation on its way up. Now, he says: “It is seeking unjustified, symmetrical praise on the way down.”
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