Chancellor Says Gov't To 'Stick With Plan' On Inflation After BoE Hikes

Chancellor of the Exchequer Jeremy Hunt has stated that the gov't intends to stick with its current economic plans in the wake of the Bank of England's 25bp hike to the base rate earlier today. Hunt: “If we stick to the plan, the Bank forecasts inflation will be below 3% in a year's time without the economy falling into a recession. But that doesn't mean it's easy for families facing higher mortgage bills so we will continue to do what we can to help households."

• Halving inflation by year-end was one of PM Rishi Sunak's 'five pledges' at the start of 2023. Initially viewed as a relatively easy win, given that inflation was then forecast to drop relatively swiftly, it now sits as a risk to gov't credibility if it is not achieved.
• Sunak's centre-right Conservatives already trail the main opposition centre-left Labour Party by double-digit margins in opinion polling. While the four other pledges (grow the economy, cut NHS waiting times, reduce national debt, stop immigration via small boats) are under the gov'ts control, the stickiness of UK inflation in 2023 so far is largely out of the gov'ts control.
• Pressure on household budgets remains a key voter concern ahead of the next election (likely in May or autumn 2024). Failing to meet the pledge on inflation by end year could pile further pressure on the gov't to provide more support to households via gov't spending/tax cuts, which in turn would impact the UK's fiscal outlook.