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 further escalate inflation, amidst growing criticism.
The meeting, scheduled for later this week, coincides with expectations that data from the Office for National Statistics on Wednesday will reveal a 21-month high of 4% inflation rate last month. The projected increase in the Consumer Price Index, up from 3.8% in previous months, would put inflation at twice the Bank of England’s 2% target.
The anticipated surge in inflation will add more pressure 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 provide relief to numerous households.
Policy measures introduced in Rachel Reeves’ previous budget, such as the rise in employers’ national insurance, have been criticized for fueling price hikes. A source from the Treasury indicated that addressing the cost of living is a top priority for the Chancellor, with considerations including actions to lower energy expenses.
The upcoming meeting with selected Cabinet ministers aims to review policy decisions within their portfolios that may contribute to inflation and increased costs. This initiative follows a joint letter from Rachel Reeves and PM Keir Starmer urging colleagues to implement policies that keep costs low to combat inflation effectively.
Recent warnings from the International Monetary Fund highlighted the likelihood of the UK experiencing the highest inflation among the world’s seven major economies this year and next. This projection could reduce the chances of a Bank of England rate cut in the near future, impacting borrowers but benefiting savers.
While the IMF revised its forecast for UK economic growth this year, concerns over the job market led to a downgrade in the estimate for the following year. Chancellor Rachel Reeves and Labour received positive news with the improved economic growth forecast, despite the cautious outlook on future job market conditions.