Why inflation figures may have given Labour false confidence

The relief from Downing Street at yesterday’s inflation data – which showed that it dipped to 2.5 per cent in the 12 months to December, down from 2.6 per cent the month before – was palpable. Darren Jones, the Chief Secretary to the Treasury, cast a breezy image as he described his boss, the Chancellor Rachel Reeves, as “brilliant”.

Keir Starmer will now be able to offer his Chancellor more than lukewarm assurances that she is not facing the chop. The news will abate the recent cycle of media criticism and with President Trump’s inauguration next week, focus will soon turn elsewhere. 

Her luck doesn’t end there. In the medium-term, the data will likely justify a further small dip in interest rates by the Bank of England. The resulting increase in disposable incomes might well buy off the political need for an emergency budget.

At least, that’s how the government will choose to see it.