Falling inflation removes obstacle to tax cuts

London, United Kingdom - February 03, 2019: Sun shines on world Headquarters of HSBC Holdings plc at 8 Canada Square, Canary Wharf. It is 7th largest bank worldwide, was established in 1865

Commenting on data showing that the rate of inflation fell to 4.6 per cent in October, Economics Fellow at the free market think tank the Institute of Economic Affairs, Julian Jessop, said:

“The sharp fall means that inflation is back on track to the Bank of England’s 2% target next year. This should slam the door on any further increases in interest rates and bring forward the timing of the first cut.

“The sharp drop also fulfils the Prime Minister’s target of halving inflation and removes at least one obstacle to tax cuts in the Autumn Statement. These are likely to focus on business taxes, with any big changes in personal taxes held back until the Budget in the Spring.”

“The government will claim that inflation would have been slower to fall if it had not taken tough decisions on fiscal policy, notably on public sector pay, spending and tax. But this is debatable. The drop in inflation mainly reflects the tightening in monetary policy, the global economic slowdown, and the decline in commodity prices, rather than anything the government has done.”

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