Copyright: Reuters
The path of rates matters economically, and politically too. These calculations are undoubtedly affecting the thinking on the election timetable.
Yesterday I was invited to Downing Street to speak to the prime minister about the state of the economy in light of yesterday’s sharp drop in inflation. He surprised me with how strongly he suggested the economy was turning around, going as far as saying it was "bouncing back" and replying it was "not just him" who was seeing green shoots of recovery.
It seemed a strong thing to say given that the UK is still officially in recession, albeit a mild one.
Last month the chancellor told me that the turning point would be visible for all to see when the Bank felt confident enough about low inflation, to cut rates. Lower rates also help his budget sums add up, and could provide extra room for manoeuvre to offer pre election giveaways.
The Bank has communicated that despite the fact the headline rate of inflation is falling rapidly, it is still looking at services inflation rising above 6% a year, and has some concerns that wages and prices could remain sticky. It is not going to cut, just because the energy price cap is falling.
Today will give us some clues as to when that turning point will come. Sometime in summer is the current expectation in markets.
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2024-03-21 09:56:15Z
CBMiMWh0dHBzOi8vd3d3LmJiYy5jby51ay9uZXdzL2xpdmUvYnVzaW5lc3MtNjg1ODE1MjfSAQA
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