Consumer price inflation fell to 3.4 percent in February, this morning’s official figures show, down from four percent in January. That’s a bigger drop than expected but it’s not falling as fast as the nation – or Rishi Sunak – would like.
The PM desperately needs voters to feel better off to avoid humiliation at this year’s general election, but today’s news isn’t the turning point he needed.
It will help, though, allowing Chancellor Jeremy Hunt to claim “the plan is working”, a message he will keep hammering home between now and election day.
The message may start to sink in with votes if inflation continues to fall over the next couple of months, as it almost certainly will.
The really good news today is the big slowdown in food inflation, which hit its lowest level since January 2022.
Staples like bread and cereals are falling fastest, in a boost for pensioners and those on lower incomes who spend more of their money on essentials.
Now we just need to be sure that retailers pass on the savings to hard-pressed customers.
Petrol prices rose slightly but in a further boost, household energy bills are set to fall by 12 percent in less than two weeks.
Economists at ING Bank reckon headline inflation should dip below two percent in either April or May.
That’s great news, although not as good as it should be, because the Bank of England looks set to squander this brilliant opportunity to get the UK moving again.
Which judging by recent experience, it probably will.
Inflation is now less than a third of its peak in October, when it hit 11.1 percent. However, it remains above the Bank of England’s two percent target. So it’s unlikely to cut rates at tomorrow’s meeting.
That’s a huge shame, as a growing body of experts reckon the BoE should be much faster to cut rates.
US investment bank Citi said yesterday that the BoE’s governor Andrew Bailey has already “left it too late” to start cutting.
They’re not the only ones. Bailey was behind the curve when interest rate inflation started to take off in 2021, famously claiming it was “transitory”.
Now he’s making the opposite mistake by failing to ease monetary policy fast enough, arguing that inflation is far from beaten.
Today’s figure will give the BoE’s rate-setting monetary policy committee (MPC) the excuse it needs to do nothing at tomorrow’s meeting.
There’s a fair chance that two of its nine members will actually vote to INCREASE rates from today’s 5.25 percent, as they did at the last two meetings.
That’s how out of touch the BoE is.
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The BoE needs to get a grip, because millions are suffering and half a million businesses could go bust unless borrowing costs are cut soon.
With council tax bills set to rise in April, and energy debt levels at record highs, many households will still struggle to meet essential costs.
Despite Chancellor Jeremy Hunt’s twin National Insurance cuts, the tax burden is still at a 70-year high. It is likely to rise even higher if Labour takes power, acting as a break on growth.
Worse, the BoE’s high interest rate policy isn’t even working on its own terms. It does little or nothing to actually reduce inflation, which is driven by global food and energy prices.
We need that first rate cut. Not in May. Or June. But tomorrow. Sadly, we’re unlikely to get it.
