There is a conundrum at the heart of Jeremy Hunt’s comments leading up to the Autumn Statement. Hunt describes inflation as an ‘evil’ that ‘erodes the pound in your pocket’: uncontroversial. So Autumn Statement, he says, has been designed by his Treasury to ‘help the Bank of England bring down inflation.’
But controlling inflation is the Bank of England’s remit, so any action will be indirect. By tightening fiscal policy, Hunt is lifting pressure off the Bank to keep pushing raising interest rates. This will be by design on the part of the Treasury. After Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget, markets were predicting rates headed for over 6 per cent, threatening to throw both British borrowers and also the government’s own interest payments into a rather dire state.
But hiking interest rates is also the best tool we have to tackle inflation.
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