Cautious Optimism Among Tory MPs As Inflation Drops To 7.9 Per Cent
Consumer price index (CPI) inflation fell from 8.7 per cent to 7.9 per cent, according to the latest figures from the Office for National Statistics (ONS). (Alamy)
4 min read
Inflation fell to 7.9 per cent in the 12 months to September from 8.7 per cent, but Tory MPs worry there is still a "long way to go" before Prime Minister Rishi Sunak can meet his target to half inflation by 2024.
The latest figures from the Office for National Statistics (ONS) also showed that core inflation – which excludes food and energy prices – dropped to 6.9 per cent.
The news will be warmly welcomed in Downing Street where Sunak stands by his target set at the start of the year to halve inflation from 10 per cent to 5 per cent. It could also provide increased hope that steeper interest rate rises may be avoided in the coming months.
This month saw the thirteenth consecutive interest rate rise by the Bank of England (BoE), from 4.5 per cent to 5 per cent, as it continues to attempt to put a lid on stubbornly high inflation.
“Inflation is falling and stands at its lowest level since last March; but we aren't complacent and know that high prices are still a huge worry for families and businesses," Chancellor Jeremy Hunt said in response to today's figures.
"The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year."
Among Tory MPs the latest figures were greeted with tentative optimism. Former cabinet minister Liam Fox, MP for North Somerset, told PoliticsHome the recorded fall in inflation was “good progress” and should make a sharp hike in rates less likely.
However, he warned Vladimir Putin's "brutal actions in stopping grain flows from Ukraine" could risk "further commodity inflation ahead," referring to the recent collapse of Russia's deal with the UN to allow grain exports from the war-torn country.
A senior Conservative MP told PoliticsHome they believed Sunak was on track to hit his pledge, contrary to prior assessments by economists, and despite it not being a “well-designed idea” to commit to.
"I never thought he would miss his target," they said. "I thought it was not the way people thought about it. Food and petrol is what they think about – they don’t think about an index."
An ex-cabinet minister told PoliticsHome that despite the falling headline rate of inflation there was a "long way to go yet" for the government.
John Baron, MP for Basildon and Billericay, and a member of the Treasury select committee, told PoliticsHome inflation could still prove to be “stickier” than most forecasters predict.
Dr George Dibb, head of the Centre for Economic Justice at IPPR, told PoliticsHome the latest inflation figures were "good news" and showed inflation was moving in the right direction.
"Inflation is coming down. It still remained high, of course, at 7.9 per cent – and it hasn't been pulled down by core inflation, it's been pulled down by fuel inflation," said Dibb.
"So core inflation has declined a little bit but still is quite high. But I think it hopefully will take a little bit of hype out of the way the economy is talked about, given that it came in under expectation, so it should calm people down a little bit.
"I think what people are looking forward to will be the next releases because coming in under expectation is positive as long as we're on a clear downward trend. That's the only way that we can get prices down. I do think the signs today are pretty positive for that."
James Smith, Research director at the Resolution Foundation, also welcomed the news – telling PoliticsHome that it may mean fewer interest rate rises in the future.
"We're now back on track to the Bank of England's forecast so that means a bit less upward pressure on interest rates, and we see markets adjusting for that already," Smith said.
"So there's one or two fewer interest rate rises expected off the back of today's data. So that's good news for anyone with a mortgage."
He added Sunak was now on track to hit his target of halving inflation by the end of the year but claimed it was "not completely guaranteed".
"Over the past couple of months inflation [looked] higher and stickier than the Bank of England's forecasts. So people were definitely worried that we would even hit that pretty sort of straightforward target of halving inflation over that period.... But it's still not completely guaranteed, based on what we're seeing."
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