Reeves and Bailey play conflicting parts in policy pantomime

Raising taxes in next Wednesday’s Budget a month before Christmas day will make the Chancellor look like Scrooge. But we now think that, due to the weaker news on activity and inflation in recent weeks, the Governor of the Bank of England will trigger a cut in interest rates a week before Christmas day, which will make him look like Santa. Looser monetary policy will offset some of the drag on GDP and inflation from tighter fiscal policy, but probably not all of it and not immediately.

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