UK inflation expected to fall to two-and-a-half-year low – business live

Chancellor Jeremy Hunt has raised the possibility of further tax cuts before the next general election.

Speaking to the Financial Times, Hunt said the government would like to cut taxes in an autumn fiscal event “if we can”.

He also cautioned, though, that it’s too soon to know if that will be possible, while acting in a fiscally responsible way.

Hunt argued that people would feel the economy had “turned a corner later this year”, citing market forecast that the Bank of England would cut interest rates this summer or autumn.

The chancellor explained:

“As we move through the year towards the autumn, some of the changes in economic policy, including lower taxes, will be felt in people’s pockets — and that’s clearly something that is significant for us.”

Hunt didn’t leave himself much headroom for further tax cuts in March’s budget, when he announced a second cut to national insurance rates.

But this month, we have ticked into a new financial year – which gives the chancellor more time to hit his fiscal rule of getting debt/GDP falling in five year’s time…..

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain may take another step out of its cost of living crisis today, when the latest inflation report is released at 7am.

Economists are hopeful it will show inflation fell again in March. The consumer prices index is forecast to drop to around 3.1%, down from 3.4% in February, showing prices rose at a slower pace.

That would pull inflation down to its lowest since September 2021 (when CPI was also 3.1%), before Russia’s invasion of Ukraine the following year sent food and energy prices spiking.

A slowing in price rises would help struggling households. Yesterday, though, the IMF warned that living standards will not improve this year.

Growth per head – one of the key measures of living standards – in Britain is expected to remain flat this year, after a 0.3% drop in 2023.

The Bank of England is looking for signs that services inflation has weakened, as it weighs up when it can start lowering UK interest rates from their currrent 16-year high.

And Rishi Sunak will be hoping for a drop in inflation that allows the Bank to start cutting rates before the next election.

Last night, BoE governor Andrew Bailey expressed confidence the UK was on its way to lower rates despite the turmoil in the Middle East.

Interviewed in Washington, at the IMF/World Bank annual meeting, Bailey said the UK was “disinflating at full employment”.

The governor said:

“There is strong evidence the process is working its way through. Our judgement on interest rates is how much do we need to see before we are confident of the process”.

The financial markets have been rattled in recent days by fears that inflation in America is stickier than hoped.

Last night, Federal Reserve chair Jerome Powell conceded it is likely to take “longer than expected” for inflation to return to the central bank’s 2%, allowing cuts to US interest rates.

The agenda

• 7am BST: UK CPI inflation report for March

• 7am BST: UK producer price inflation report for March

• 9.30am BST: UK house price and rental costs data

• 10am BST: Eurozone inflation report for March (final estimate)

• 2pm BST: IMF to release its latest Fiscal Monitor report