Counsellor Andrew Bailey told claims that near double-digit inflation was primarily driven by the war in Ukraine are becoming less credible now that the government has taken action to cut energy bills, a criticism of the bank’s track record in controlling inflation.
In a letter to Mr Bailey that represented a change of tone compared to Rishi Sunak, Mr Kwarteng said: “The current high inflation is making it difficult for households to pay energy bills and cover other living costs, while putting more costs on businesses and reducing the certainty they need to thrive. .
Inflationary pressures are becoming more domestically driven.
He stressed that the bank’s task is to ensure that inflation, currently at 9.9 percent, returns to the 2 percent target.
“I know and expect that the MPC will continue to take the necessary strong measures to achieve this,” he said.
This came as Bank of England policy makers warned that Britain was already in a recession as they raised interest rates by 0.5 percentage point, surprising money markets that had expected a drastic 0.75 point rise.
And in another sign of tensions between the new government and the bank, a Downing Street spokesman cast doubt on claims that a recession has already begun, saying that expectations could “flip and change”.
Mr. Kwarteng”Shamelessly pro-growth“The situation has led to speculation that big tax cuts will be made in the mini-budget on Friday.
Liz Truss’ ally has rocked the Treasury since taking charge this month, including by ousting her permanent secretary, Sir Tom Scholar.
Economists at the Institute for Fiscal Studies said Friday’s announcements will likely amount to “the largest tax-cutting financial event since Nigel Lawson’s 1988 budget.”
The chancellor confirmed that he canceled the 1.25 percentage point increase in National Insurance (NI) imposed by Mr Sunak, to pay for welfare costs and deal with the NHS backlog.
In addition to canceling the NI increase from November, saving the average worker £330 next year, the chancellor will also announce a torch of bureaucracy designed to speed up infrastructure projects and create new low-tax investment zones to drive economic growth.
Mr. Kwarteng will announce two previously unreported “rabbits out of the hat”. Several policy actions originally planned for the fall budget were also submitted for inclusion in Friday’s statement instead.
On Thursday evening, there was speculation that a value-added tax and larger tax credits for business investment could form part of the package.
Mr Kwarteng will say: “Growth is not as large as it should be, which has made it difficult to pay for public services, which requires higher taxes.
“This recession cycle has forecast the tax burden to reach its highest levels since the late 1940s. We are determined to break that cycle. We need a new approach for a new era focused on growth.
This is how we will provide higher wages, greater opportunities and sufficient revenue to fund our public services, now and in the future.