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Speculation Surrounding Snap Election Escalates After Low Inflation Print

UK
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Correction: Fixed typo in title. Media speculation surrounding the prospect of PM Rishi Sunak calling a snap general election in the summer has intensified following the low inflation print recorded this morning. Jason Groves at the Daily Mail posts on X: "Westminster rumour mill in overdrive that Sunak is about to call election for July 4. May yet prove to be unfounded but No 10 currently silent on the question."

  • Political betting markets have recorded a notable shift in the past 24 hours, with the implied probability of a Q224 general election rising from 14.3% on 21 May to 33.3% at present according to data from Smarkets (see chart below).
  • Calling an early eleciton would be a extremely risky move for Sunak and his centre-right Conservative party. The gov't is coming off the back of a set of extremely poor local election results at the start of May, and opinion polling continues to show the Conservatives trailing the main opposition centre-left Labour party by anywhere between 16% and 27% over the past seven days. Even the lower end of that range, if replicated in a general election, would result in a comfortable Labour majority.
  • The broad expectation among political pundits is for the election to take place in Oct-Nov 2024, allowing the economic 'feel good' of lower inflation and potentially lower interest rates to have become more pronounced.

Chart 1. Betting Market Implied Probability of Next General Election Date (by Quarter), %

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Correction: Fixed typo in title. Media speculation surrounding the prospect of PM Rishi Sunak calling a snap general election in the summer has intensified following the low inflation print recorded this morning. Jason Groves at the Daily Mail posts on X: "Westminster rumour mill in overdrive that Sunak is about to call election for July 4. May yet prove to be unfounded but No 10 currently silent on the question."

  • Political betting markets have recorded a notable shift in the past 24 hours, with the implied probability of a Q224 general election rising from 14.3% on 21 May to 33.3% at present according to data from Smarkets (see chart below).
  • Calling an early eleciton would be a extremely risky move for Sunak and his centre-right Conservative party. The gov't is coming off the back of a set of extremely poor local election results at the start of May, and opinion polling continues to show the Conservatives trailing the main opposition centre-left Labour party by anywhere between 16% and 27% over the past seven days. Even the lower end of that range, if replicated in a general election, would result in a comfortable Labour majority.
  • The broad expectation among political pundits is for the election to take place in Oct-Nov 2024, allowing the economic 'feel good' of lower inflation and potentially lower interest rates to have become more pronounced.

Chart 1. Betting Market Implied Probability of Next General Election Date (by Quarter), %

Keep reading...Show less