(Bloomberg) — UK Chancellor of the Exchequer Jeremy Hunt said the prospect of interest rate cuts later this year would lift the mood of voters, hinting that Prime Minister Rishi Sunak won’t call a general election until the fall.
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“The feel-good factor as interest rates start to come down, as people start to feel higher real disposable incomes, will be stronger in people’s minds come the early autumn than it is now,” Hunt said on Tuesday in a Bloomberg TV interview. “People have been through a very bruising period.”
Hunt’s remarks are likely to focus attention on the prospect of an election in the fall. Sunak has already said he’s working on the assumption a vote will be held in the second half of the year — though he can call one for as late as January 2025, and speculation persists in Westminster around the possibility of a summer election.
The chancellor’s assessment of the UK economy came after Bank of England Governor Andrew Bailey suggested in an interview with the International Monetary Fund that the UK might be able to lower interest rates before the US, saying there is more “demand-led inflation pressure” in America than Britain, where there is “strong evidence” of price pressures retreating.
The latest IMF forecasts – unveiled on Tuesday – predict the UK will have weaker economic growth this year than any other Group of Seven nation except Germany. The British economy is expected to grow 0.5% this year, compared to a previous estimate of 0.6%, the IMF said.
The weak economic backdrop is a concern for Sunak’s governing Conservative Party, which trails the Labour opposition by around 20 points in recent polls. Hunt and Sunak have sought to change voter sentiment with a series of personal tax cuts over the last 6 months — with little effect so far.
The chancellor, nevertheless, pointed to the UK’s longer-term economic forecasts, saying: “we think we have very strong growth prospects.” He also said that the days of double-digit inflation that the UK saw 18 months ago are “well and truly behind us.”
–With assistance from Tom Rees and Philip Aldrick.
(Updates with more details starting from third paragraph.)
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