Inflation: Cost of living challenges require bold decisions | Money News | Latest Lifestyle News
You know bad economic news is looming when a Chancellor of the Exchequer tries to get their retaliation in first.
Treasury guidance on Tuesday afternoon that Rachel Reeves has prioritised easing the cost of living had to be seen in the light of inflation figures, published this morning, and widely expected to rise above 4% for the first time since the aftermath of the energy crisis.
In that context the fact consumer price inflation in September remained level at 3.8% counts as qualified good news for the Treasury, if not consumers.
Money latest: What inflation hike means for state pension and rail fare increases
The figure remains almost double the Bank of England target of 2%, the rate when Labour took office, but economists at the Bank and beyond do expect this month to mark the peak of this inflationary cycle.
That’s largely because the impact of higher energy prices last year will drop out of calculations next month.
Please use Chrome browser for a more accessible video player
5:27
Inflation sticks at 3.8%
The small surprise to the upside has also improved the chances of an interest rate cut before the end of the year, with markets almost fully pricing expectations of a reduction to 3.75% by December, though rate-setters may hold off at their next meeting early next month.
September’s figure also sets the uplift in benefits from next April so this figure may improve the internal Treasury forecast, but at more than double the rate a year ago it will still add billions to the bill due in the new year.
Please use Chrome browser for a more accessible video player
10:13
Minister ‘not happy with inflation’
For consumers there was good news and bad, and no comfort at all from the knowledge that they face the highest price increases in Europe.
Fuel prices rose but there was welcome relief from the rate of food inflation, which fell to 4.5% from 5.1% in August, still well above the headline rate and an unavoidable cost increase for every household.
Read more from Gossip Wire News:
Beef market in turmoil and affecting farmers and consumers
Rachel Reeves looking at cutting energy bills in budget
The chancellor will convene a meeting of cabinet ministers on Thursday to discuss ways to ease the cost of living and has signalled that cutting energy bills is a priority.
The easiest lever for her to pull is to cut the VAT rate on gas and electricity from 5% to zero, which would reduce average bills by around £80 but cost £2.5bn.
More fundamental reform of energy prices, which remain the second-highest in Europe for domestic bill payers and the highest for industrial users, may be required to bring down inflation fast and stimulate growth.
Stay inspired with the latest in lifestyle! Our website covers everything from wellness tips and fashion trends to food, relationships, culture, and everyday living.
For uplifting stories, expert advice, and trending lifestyle updates, visit us regularly by clicking here.