The Bank of England is predicting that Chancellor Rachel Reeves' upcoming budget will help slash the UK's annual inflation rate by as much as half a percentage point from mid-2026. According to Clare Lombardelli, a deputy governor at the central bank, the policies outlined in the budget are likely to reduce headline inflation by 0.4 to 0.5 percentage points over the next year.
Reeves' budget aims to tackle the cost of living crisis head-on with measures such as removing green subsidies from household energy bills and freezing rail fares. The government will also stop paying for energy bills directly, instead, it will be paid out of general taxation, which is expected to save households an average of £150 a year from next April.
The Bank's assessment suggests that the bulk of the reduction in inflation will come from these energy-related measures, as well as a decision by the Chancellor to freeze fuel duty for motorists. This could lead to lower borrowing costs at the Bank's upcoming policy meeting on Thursday, with markets predicting a cut in interest rates to 3.75%, down from 4%.
However, some experts have warned that while Reeves' budget measures may provide short-term relief, they may also push up inflationary pressures in the future due to higher employment costs and stronger workers' rights. The Bank's deputy governor cautioned that it will need to take into account both the short-term impact of the budget on inflation and longer-term prospects.
Inflation rates have been falling steadily since peaking at over 11% last year, but remain above the Bank's target of 2%. The Bank had previously predicted that inflation would fall to around 2.5% next year, and this latest assessment suggests that Reeves' budget measures could help achieve that goal.
Reeves' budget aims to tackle the cost of living crisis head-on with measures such as removing green subsidies from household energy bills and freezing rail fares. The government will also stop paying for energy bills directly, instead, it will be paid out of general taxation, which is expected to save households an average of £150 a year from next April.
The Bank's assessment suggests that the bulk of the reduction in inflation will come from these energy-related measures, as well as a decision by the Chancellor to freeze fuel duty for motorists. This could lead to lower borrowing costs at the Bank's upcoming policy meeting on Thursday, with markets predicting a cut in interest rates to 3.75%, down from 4%.
However, some experts have warned that while Reeves' budget measures may provide short-term relief, they may also push up inflationary pressures in the future due to higher employment costs and stronger workers' rights. The Bank's deputy governor cautioned that it will need to take into account both the short-term impact of the budget on inflation and longer-term prospects.
Inflation rates have been falling steadily since peaking at over 11% last year, but remain above the Bank's target of 2%. The Bank had previously predicted that inflation would fall to around 2.5% next year, and this latest assessment suggests that Reeves' budget measures could help achieve that goal.
The energy bill thingy sounds like a cop-out to me. Theyre just gonna pass the buck to us taxpayers instead of actually doing somethin about it. And what about all the people who are already strugglin' to pay their bills? Freezin rail fares and fuel duty is just a drop in the ocean for most ppl.
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. they're just delaying the inevitable - a full-blown energy crisis is coming and they won't be able to stop it. freezing fuel duty is like putting a Band-Aid on a bullet wound, it won't fix the underlying issue. plus, £150 off energy bills ain't nothing for most people, they'll still be struggling to make ends meet 
. it's all just a short-term solution to hide the real problem.
but some experts are saying that might just push prices up later on so not sure about that 
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. But we need to keep an eye on how this budget will play out in the long run 
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Like, removing green subsidies from energy bills might be a good idea, it's just not gonna make as big of an impact as they're saying it will. And freezing rail fares is nice and all, but is that really gonna make a dent in inflation when the bigger picture stuff isn't being addressed? 
And don't even get me started on fuel duty... it's all just Band-Aid solutions 
. I don't know about u but I think Reeves is doing the right thing tho 
. but at the same time, idk if its all just a short-term fix...some experts are worried that these measures might actually make things worse in the long run 
some experts are worried about higher employment costs and stronger workers' rights pushing up inflation in the future 
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Fingers crossed the Bank's next policy meeting is indeed a rate cut... that would be sweet 
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I mean, people have been suffering from high energy bills and all that, so if this budget can help bring prices back down a bit, that'd be awesome. 
It's just one of those tricky things where you've got to balance out the costs and benefits. And some experts are saying it could actually push up inflationary pressures in the future, so yeah, I'm not totally sold on this plan yet... 
According to the data, they're expecting a 0.4-0.5% reduction in inflation by mid-2026 
which means the cost of living crisis might start to ease soon 
️. But I'm worried 
, experts think they'll push up inflationary pressures in the future 
. Anyway, interest rates might get cut to 3.75% 
. The Bank's prediction has changed, from 2.5% next yr to maybe 2% now 
Stats are in: 
