A ‘bumpy’ battle to beat inflation, says minister

A CABINET minister braced Britain for more economic pain today as he warned the battle to halve inflation by the end of the year would be “bumpy and difficult”.

Work and Pensions Secretary Mel Stride believes this target will be achieved by Bank of England action on interest rates and the Government’s fiscal policies such as “keeping on top of the level of wage increases”. Speaking on LBC Radio, he added: “It’s going to be bumpy, it’s going to be difficult, it’s difficult in many other countries too. But we are going to stay the course and get inflation down.”

The Bank of England’s Monetary Policy Committee is expected to raise interest rates from 4.5 per cent, to possibly 5.5 per cent or even higher.

Matthew Ryan, head of market strategy at financial services firm Ebury, said: “Markets are now pricing in more than four additional interest rate increases, and we do not rule out the possibility that the terminal rate will land above six per cent.”

Inflation fell from 10.1 per cent in March to 8.7 per cent in April but at a slower rate than expected in the City.

Wall Street giant Goldman Sachs now expects inflation in the UK to stay above the BoE’s two per cent target into 2026. By the end of this year, it will be around 4.5 to 5 per cent, according to some economists.

Even though Mr Sunak will be able to say he has met his inflation target, many workers will still be seeing realterms wage cuts if pay deals are below this level of inflation.

Many families are particularly finding their weekly budget squeezed by food inflation, still at 19 per cent in April, according to the Office for National Statistics.

Ministers have been in talks with supermarket chiefs about keeping down prices, particularly basic items, with the Competition and Markets Authority also probing this sector.

Mr Stride stressed the Government was seeking to ensure “no stone is left unturned when it comes to — particularly on the staples — trying to keep those prices as low as possible”.