Giving its verdict on last week's budget as it announced a quarter-point cut in interest rates to 4.75%, the central bank said the chancellor's plans would drive up inflation to a fresh peak next year.
The monetary policy committee (MPC) voted by a majority of eight to one to reduce rates for the second time this year to ease the pressure on households and businesses from high borrowing costs.
However, it said Reeves's £70bn of additional spending backed by higher taxes and borrowing would add about 0.5 percentage points to headline inflation by the middle of next year and 0.75% to gross domestic product.
Updating its forecasts after taking budget measures into account, the Bank said that it expected inflation to now peak at 2.75% by the middle of next year and then remain above the 2% target in 2026, until falling back in 2027-a year longer than it had expected in its previous forecasts, published in August.
This story is from the November 08, 2024 edition of The Guardian.
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This story is from the November 08, 2024 edition of The Guardian.
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