OBR growth and inflation forecasts paint a much bleaker picture
The OBR’s growth and inflation forecasts on Wednesday presented a much bleaker picture than prior projections laid out in March.
Back then, the OBR said inflation would fall to 0.9% by the end of 2024, but on Wednesday revised that upwards to 2.8%. The consumer price index is not expected to hit the Bank of England’s 2% target until 2025, meaning rates will likely stay “higher for longer” even as growth stutters.
Growth forecasts were also downgraded sharply to 0.6% this year and 0.7% next year, from the 1.8% and 2.5% predicted in March.
“It is clear that interest rates are weighing on the wider economy and making up for these periods of lost growth will be difficult for the U.K. despite the government’s best intentions,” said Lindsay James, investment strategist at Quilter Investors.
“This was billed as an ‘Autumn Statement for growth’ and the government is attempting to give the economy a shot in the arm, but it is questionable how effective and long lasting this growth will be.”
With an election slated for some time in 2024 and the Conservatives trailing heavily in the polls, James said Wednesday’s statement was “much more political in nature.”
“The giveaways announced today are somewhat of a gamble by the government given the state of play with price rises and economic growth. Inflation is still running at more than double the Bank of England’s target it could be there is even less headroom for giveaways in the Spring,” she said.
“As a result, today’s decisions are being driven much more by the polls than any fundamental improvement in the state of the UK’s long-term finances.”
– Elliot Smith
Labour’s shadow chancellor highlights impact of existing tax increases
Beginning her response, the main opposition Labour Party’s Shadow Chancellor Rachel Reeves says the impact of previous income tax freezes eclipses Wednesday’s National Insurance cut.
“The government had already put in place tax increases worth the…
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