The net giveaway the Chancellor announced in the Autumn Statement is designed to curry favour ahead of an election late in 2024. However, fiscal policy is still being tightened in 2024/25 and it looks as though whoever wins the election will have to implement a big squeeze on real spending. What’s more, the near-term boost to the economy from the new tax cuts may just mean inflation is a bit higher than otherwise. This supports our view that the Bank of England won’t cut interest rates from 5.25% until late in 2024.
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