High inflation expected this autumn

Jeremy Hunt, the Chancellor of the Exchequer, has issued a cautionary statement, suggesting that the high inflation rate in Britain will impede the possibility of pre-election tax cuts this autumn. This announcement comes in the midst of indications from the Bank of England that another interest rate hike will be implemented next week, aimed at alleviating the mounting cost of living pressures.

Speaking during a visit to India, Hunt expressed his reluctance to inject additional funds into consumers’ pockets as part of his November fiscal package. His primary concern is that such a move could risk overheating the economy and exacerbating inflation, making it more challenging for the Bank of England to rein it in. In an interview with Bloomberg TV, he emphasized the importance of taming inflation. Aligning with both the Prime Minister’s target to halve it and the Bank of England’s aim to reduce it to 2%.

Hunt acknowledged that financial constraints would be prevalent due to the increasing inflation and rising interest rates. Which would augment the government’s debt interest payments. However, he remained resolute in his commitment to prioritizing inflation control in the autumn statement.

Catherine Mann, a member of the Bank’s monetary policy committee, supported a more hawkish stance on interest rates. She expressed her willingness to risk causing economic damage by tightening monetary policy more than necessary. Rather than permitting inflation to take root. Mann argued that erring on the side of overtightening was preferable. As insufficient action might lead to a persistent cost-of-living crisis requiring more drastic measures to rectify.

Mann’s forthcoming speech indicated her intent to vote in favour of a 15th consecutive interest rate hike. Which financial markets anticipate to be a quarter-point increase to 5.5%. She emphasized the need for the Bank to convey a resolute commitment to swiftly return the annual inflation rate. Currently at 6.8%, to its official 2% target.

Catherine Mann has consistently advocated for a more aggressive approach to monetary policy. Particularly since the Bank initiated interest rate hikes from the record-low of 0.1% in December 2021.