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 planned meeting, scheduled for this Thursday, coincides with the anticipated release of inflation data by the Office for National Statistics on Wednesday. Projections suggest that inflation reached a 21-month peak of 4% last month, surpassing the Bank of England’s 2% target by double the amount.
The impending surge in the Consumer Price Index, up from 3.8% in the preceding months, poses additional challenges for both Labour and the government, especially with the Autumn Budget approaching. Speculation is rife that the government is contemplating eliminating VAT on household energy bills to alleviate inflationary pressures on millions of households.
Policies implemented 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 stated that the Chancellor is prioritizing addressing the cost of living, with a focus on exploring various avenues, including measures to reduce energy costs.
The meeting on Thursday with select Cabinet ministers aims to assess policy decisions within their respective portfolios that may be contributing to inflation and heightened expenses. This initiative follows a joint letter from Rachel Reeves and PM Keir Starmer urging colleagues to prioritize strategies that prevent price escalations.
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 current and upcoming years. This unexpected rise in prices may reduce the likelihood of a Bank of England interest rate cut, impacting borrowers negatively but benefiting savers.
On a positive note, the IMF upgraded its economic growth forecast for the UK this year, providing some relief for Chancellor Rachel Reeves and Labour. However, concerns over the job market led to a downward revision of next year’s growth estimate by the IMF.