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A triple whammy of encouraging economic news this week has fuelled optimism in UK leadership circles – but Prime Minister Rishi Sunak and Chancellor Jeremy Hunt remain guarded, aware risks still lurk.
The upbeat data started Wednesday as inflation declined 6.7%, welcomed by Sunak as proof his strategy was reducing price growth. However, anticipating a rate rise from the Bank of England, ministers were surprised when the Monetary Policy Committee held at 5.25% instead.
Completing the trifecta, public borrowing figures for August came in £1 billion lower than forecast.
While hinting the interest rate peak may be reached, the decisions carry economic and political significance for Sunak. Yet challenges loom despite the triple boost.
One concern is a mortgage “time bomb” as 800,000 households exit teaser rates in late 2023, with 1.6 million more refinancing in the expected election year of 2024.
With Sunak targeting halved inflation by end-2023, a December drop to around 5.3% is required. But he and Hunt say the battle isn’t won. “The fight against inflation never happens in a straight line,” Hunt cautioned.
Hunt is resisting 2022 tax cut calls to avoid complicating inflation efforts. Sunak eyes the Spring Budget for pre-election giveaways after declaring victory over inflation.
The opposition expects 2024 polls amid improving but still pressured living costs. Tories hope voters see brighter horizons. Ex-PM Tony Blair noted he won power in 1997 amid recovery.
However, despite upbeat data, Sunak knows risks remain until inflation is decisively tamed. He won’t take stability for granted before then.