Rishi Sunak’s Economic Pivot: Inflation Data May Mark Turning Point in Premiership Amidst Election Pressures

Potential economic shift may alter trajectory of Rishi Sunak's leadership

The Prime Minister is optimistic that following this week, he can assert success in controlling inflation that escalated during Liz Truss's term.

Assistant Political Editor @SamCoatesSky

Monday, May 20, 2024, 6:

The Downing Street calendar prominently highlights Wednesday morning, the scheduled time for the Office for National Statistics to publish its monthly inflation figures.

On the "Politics at Jack and Sam's" podcast, the hosts debate if the prime minister will leverage this week to mark a pivotal moment in economic policy.

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Rishi Sunak aims to establish recognition for what he anticipates will be regarded as one of his significant economic successes—curbing inflation following Liz Truss's term in office.

When Mr. Sunak assumed office in October 2022, CPI inflation had climbed to a high of 11.1%.

The rate has consistently decreased and now stands at 3.2%, with a government official predicting it will drop to 2.2%.

The administration may contend that, regardless of the exact results, the figures have returned to the "usual" levels seen before the pandemic. Over the previous decade, the typical standard deviation hovered around 1%.

This implies that the upcoming meeting of the Bank of England's Monetary Policy Committee on June 20th will not necessarily lead to a decrease in the current interest rates, which are at a 16-year peak of 5.25%.

This could also be due to the possibility of inflation increasing later this year as the impact of decreasing energy prices fades from the year-over-year comparisons.

Anticipate the prime minister alongside Chancellor Jeremy Hunt to actively promote this on Wednesday. They will claim that the reduction in inflation is due to hard choices—implying tax reductions favored by other Conservatives but not by Downing Street.

This is significant because the central Conservative message during the election campaign will be to continue with their strategy, asserting that it is effective. Inside Downing Street, there's a substantial gamble—or possibly a faint hope—that by the time the elections roll around in November, this sentiment will begin to resonate with the public.

This week, the cap on energy prices might assist in achieving that objective.

This Friday at 7am, the regulatory body Ofgem is scheduled to make a statement, and it is anticipated that they will announce a reduction of over £100, bringing it to its lowest point in over two years.

This suggests that energy costs could be reduced by £500 annually compared to last summer. Despite prices remaining significantly above previous levels, there's a gradual return to normalcy.

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