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Rishi Sunak has said that voting for the Conservatives in the next general election is the same as voting to cut interest rates, given the success of his efforts to curb inflation.
Sunak’s pledge came just over a week after he called a general election on the same day he announced that inflation had fallen to close to his target level.
Questioner Times If voting for his party would ensure that interest rates would start to fall, he said: “Of course, because we are the party that is committed to keeping inflation down, which is a necessary condition for lowering interest rates.”
“And I think people can see that we’ve done that, and it allows us to think more positively and confidently about the future.”
The promise is a significant departure from the language the government has previously used when discussing interest rates, with ministers repeatedly pointing to global factors and the Bank of England’s operational independence in deciding to cut rates.
Inflation fell to 2.3% in April, the lowest level in three years and close to its 2% target, leading many to expect the Bank of England may announce interest rate cuts in the coming months.
Meanwhile, the central bank has kept its base interest rate at a 30-year high of 5.25% from August 2023 onwards to tame high inflation, but recent figures suggest that this trend may be coming to an end.
Since the newly elected Labour government in 1998 gave the Bank of England’s Monetary Policy Committee (MPC) operational independence over monetary policy, the decision to raise or lower interest rates has rested solely with the committee.
In contrast to Mr Sunak’s recent comments, the Chancellor, the Chancellor and other ministers have suggested that interest rates are not their concern but should be decided by the Bank of England.
October 17, 2022
“It is not for the government to say what the Bank of England does when its Monetary Policy Committee takes decisions on interest rates,” Jeremy Hunt said in a statement to the House of Commons shortly after he was appointed Chancellor of the Exchequer in the final weeks of Liz Truss’s short-lived government.
He added that he had met with Bank of England Governor Andrew Bailey to understand “what the Bank of England needs to hear to feel that inflationary pressures are subsiding and that there will be no need for as large a rate hike as some are predicting.”
November 3, 2022
In a statement released shortly after the Bank of England announced a historic 0.75 percentage point interest rate hike in November 2022, Hunt said the government’s only role in keeping interest rates low was to ensure “stability”.
“The most important thing the UK Government can do now is to restore stability, get its finances in order, reduce debt and keep interest rate increases as low as possible,” he said.
November 17, 2022
In Hunt’s first autumn statement, and Sunak’s first since taking over as chancellor, the chancellor told MPs that much of the credit for keeping inflation down was given to the government. Bank of England.
“The Bank of England has done an excellent job since independence but I now wholeheartedly support it in its mission to eradicate inflation and I can say today that we will not change that mandate,” he said.
June 14, 2023
Speaking to the BBC news Last year, the chancellor said the UK had no choice but to raise interest rates to contain inflation, adding: “We must do all we can as a government, as a country, to support the Bank of England in its mission to keep inflation out of the system.”
June 21, 2023
Answering a question about the economy from Stephen Flynn during Prime Minister’s Questions, Mr Sunak told MPs that rising interest rates were a “global problem”, before saying his government would only be effective in controlling inflation.
He said: “Our interest rates are in line with the US, Canada, Australia and New Zealand. Inflation and rising interest rates are a global phenomenon.”
“But that’s why I made it clear early on that getting inflation under control is the right economic priority. That’s what this Administration will do, but it will require difficult and responsible decisions.”
June 26, 2023
In a statement in the House of Commons shortly after interest rates rose above 5% for the first time in decades, Hunt told MPs that the UK was suffering from high inflation “like the rest of the world”.
“We firmly support an independent Monetary Policy Committee taking all necessary steps to return inflation to our 2 percent target over the medium term,” he said.
“As interest rates rise we will not take any action that would undermine the Bank of England’s monetary objectives, but where we can take non-inflationary steps to ease the anxiety facing families we will do so.”
July 5, 2023
Speaking at Prime Minister’s Questions, Deputy Chancellor Oliver Dowden, speaking for Mr Sunak, told MPs he supported “the Bank of England’s independence to take the steps necessary to contain inflation” with interest rates remaining at 5%.
July 12, 2023
Mr Dowden also spoke for Mr Sunak at Prime Minister Questions the following week, when he told MPs that high interest rates were being driven by global factors.
Responding to comments by SNP Mhairi Black, he said: “People all over the world know that rising mortgage rates are being driven by rising inflation, and rising inflation is being driven by Russia’s invasion of Ukraine and post-Covid supply chains.”
“What we need to do is halve inflation. Only once we get inflation under control can we bring mortgage rates down. And that requires discipline – discipline on spending, on civil servant salaries, on energy supplies.”
September 5, 2023
Chancellor of the Exchequer Andrew Griffiths, in a statement to the House of Commons, also suggested that high interest rates were caused by global factors outside the government’s control.
“Throughout 2022, interest rates have risen in most Western countries due to high inflation caused by Putin’s illegal invasion of Ukraine,” he told lawmakers.
“The path to lower interest rates is through low inflation which is why the Chancellor has made halving inflation one of his five priorities for this year. I am pleased that the Bank of England’s latest forecasts show we are on track.”
October 25, 2023
During Prime Minister’s Questions, Mr Sunak told Labour leader Sir Keir Starmer that rising inflation and interest rates were a “global challenge” and that Labour was not to blame.
“They still ignore the fact that rising interest rates are a global challenge. Interest rates are at their highest in the US and Europe for more than 20-30 years. Mortgage rates have doubled in the US and tripled in Europe,” he said.
November 14, 2023
In a statement in the House of Representatives, Finance Minister Bim Afolami told lawmakers the government was “doing all it can” but high inflation and interest rates had once again become a “global phenomenon”.
“We find ourselves in this situation because there is a global phenomenon happening. We are doing all we can. We are working closely with the Bank of England and the policies of the Chancellor, the Chancellor and this Government will see interest rates fall over time,” he said.
November 21, 2023
In his second autumn statement, Mr Hunt suggested the government needed to be “responsible” with the finances to help the Bank of England keep inflation in check after interest rates rose to 5.25%.
“We have delivered on our promise to halve inflation but we must continue to support the Bank of England to get inflation down to 2 per cent – and that means taking responsibility for the national finances,” he said.
March 19, 2024
Asked in the House of Commons whether he would ask the Bank of England to cut interest rates, Hunt emphasised the bank’s independence.
He said: “The Chancellor never comments on the Bank of England’s decisions on interest rates, but what I can say is that the Office for Budget Responsibility has projected in its Budget that inflation will fall to around its target in the coming months, so interest rates will most likely start to fall.”
May 22, 2024
Finance Minister Afolami also raised the issue of the Bank of England’s independence last week when asked about interest rates just hours before the general election was called.
He told MPs: “Interest rate policy is decided by the Bank of England’s Monetary Policy Committee, but by working with the Bank of England to contain inflation we hope that, as a result of inflation reaching its target, interest rates will start to fall at some point later this year, as the IMF has suggested.”