Spring Tax Giveaway Hopes Rise as Interest Rate Cut Predicted

Prime Minister Rishi Sunak has received an early Christmas gift as inflation in the UK fell. The surprise slump in inflation has also boosted hopes for a spring tax giveaway. Experts are now predicting interest rate cuts to begin in May, ahead of a general election.

Inflation Drops to Lowest Level in Two Years

Inflation, which measures the rate at which prices rise, dropped from 4.6 per cent to 3.9 per cent last month, marking the lowest level in two years. The figures released by the Office for National Statistics have been hailed as "good news for everyone" by the Prime Minister.

Possible Personal Tax Cuts in Next Budget

Chancellor Jeremy Hunt has stated that the economy is "back on the path to healthy, sustainable growth". With the decrease in inflation, Sunak could potentially cut personal taxes in the upcoming Budget. Money markets are also betting on five interest rate cuts in the coming year.

Long-Term Impact on Interest Rates

Traders are forecasting interest rates to be lower than four per cent by next December, down from the current 15-year high of 5.25 per cent. While Sunak has achieved his goal of halving inflation, prices are still rising at almost twice the Bank of England's two per cent target.

Government Focus on Sustainable Growth and Tax Relief

Jeremy Hunt emphasized the importance of sustainable economic growth in improving the lives of hardworking families. He also expressed the government's intention to reduce the tax burden, allowing people to keep more of their earnings each month.

Bank of England's Perspective

Bank Governor Andrew Bailey has acknowledged that there is still work to be done to bring inflation down. The Bank also stated that monetary policy is likely to remain restrictive for an extended period of time. Cabinet minister Mel Stride described the fall in inflation as a "turning point".

Relief for Families and Shadow Chancellor's Response

Shadow Chancellor Rachel Reeves has welcomed the fall in inflation, stating that it will come as a relief to families.