Jeremy Hunt issues warning to Labour over 'damaging' policy that could harm economy
Hopes of a Bank of England interest rate cut have been dashed after inflation failed to drop last month.
Labour must do the “hard work” of keeping inflation down by avoiding price increases through “damaging” new workers’ rights, Jeremy Hunt has warned.
Last month’s 2.2% inflation rate is hovering just above the Bank of England’s (BoE) 2% target.
The unchanged figure has dampened hopes of a BoE interest rate cut tomorrow.
Mr Hunt MP, Shadow Chancellor, said: “Labour inherited inflation at the Bank of England’s target and today’s figures show they must do the hard work to keep inflation down, as we did in Government.
“That includes rejecting potentially damaging new employment rights which will put up the cost of labour and ultimately raise prices as a result.”
Labour risks a rise in business costs over its workers’ rights reforms which are set to be unveiled in coming weeks.
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Meanwhile it is largely expected that the BoE interest rates will be left at 5%.
Monica George Michail, at the National Institute of Economic and Social Research (Niesr), said: “Given that inflation is set to gently rise towards the end of the year, and that underlying inflation remains elevated, this reduces chances of a rate cut tomorrow..”
While CPI is below recent forecasts by the BoE, inflation is predicted to edge further above the 2% target towards the end of the year, leaving policymakers in no rush to cut rates, according to economists.
The rise back up in services inflation comes after an encouraging drop in July, also signalling that underlying price pressures remain in the economy.
Grant Fitzner, chief economist at the ONS, said: “Inflation held steady in August as various price fluctuations offset each other.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels.
“Also, the prices of shop-bought alcohol fell slightly this month, but rose at the same time last year.”
Jake Finney, economist at PwC, said the “Taylor Swift effect” may be partly behind the more than doubling in cinemas, theatres and concerts price inflation, which jumped from 4.4% to 9.2% last month, with August seeing the last of her UK dates for the Eras tour.
He added the latest data overall “suggests that a September rate cut is unlikely”.
Mr Finney said: “However, we expect that the latest inflation data will do little to dissuade the Bank from cutting in November, given that headline and services inflation are both tracking lower than their latest externally published forecasts.”
Darren Jones, Chief Secretary to the Treasury, said: “Years of sky-high inflation have taken their toll; and prices are still much higher than four years ago.
“So, while more manageable inflation is welcome, we know that millions of families across Britain are struggling, which is why we are determined to fix the foundations of our economy.”
