Rachel Reeves is set to convene a meeting with key Cabinet members to emphasize the importance of reducing inflation. The Chancellor will stress the necessity for government departments to refrain from actions that could exacerbate inflation, amidst growing criticism.
The meeting, slated for later this week, coincides with an anticipated report from the Office for National Statistics expected to reveal a 4% inflation rate, the highest in 21 months. This surge in the Consumer Price Index, up from 3.8% in the previous months, would indicate that inflation is double the Bank of England’s 2% target.
The impending inflation hike adds further strain on Labour and the government, especially with the Autumn Budget approaching. Speculation suggests that the government is contemplating eliminating VAT on household energy bills to combat inflation and ease financial burdens on numerous households.
Policies introduced in Rachel Reeves’ previous budget, such as the increase in employers’ national insurance, have been criticized for fueling price hikes. A source from the Treasury emphasized the Chancellor’s commitment to addressing the cost of living crisis urgently, with a focus on exploring various measures, including reducing energy costs.
The upcoming meeting with select Cabinet ministers aims to evaluate policy decisions that may be contributing to inflation and heightened costs. This initiative follows a joint letter from Rachel Reeves and PM Keir Starmer urging colleagues to prioritize measures that keep costs down and mitigate inflationary pressures.
Recent warnings from the International Monetary Fund indicate that UK households will face the highest inflation among the world’s seven major economies in the coming years. This projection suggests a less favorable outlook for another Bank of England rate cut in the near future, impacting borrowers but benefiting savers.
While the IMF has revised its forecast for UK economic growth upwards for this year, concerns over the job market have led to a downward revision for next year. These developments present a mixed outlook for Chancellor Rachel Reeves and Labour in navigating the economic landscape.