Rachel Reeves has been dealt a further blow in her bid to fulfil Labour’s primary mission of reigniting economic growth, as a downgraded forecast overshadowed news of an interest rate cut.
The Bank of England has halved its projections for growth this year because of the impact of the chancellor’s autumn Budget, and inflation is now expected to rise higher than previously estimated, to 3.7 per cent.
The Bank also warned that more people will be out of work, as firms swallow higher taxes and an increase to the minimum wage.
Ms Reeves, whose future as chancellor is being questioned over her record in the first seven months of the Labour government, was warned the “putrid” new growth forecast “needs to be a wake-up call”.
However, she got a much-needed boost as the Bank announced a cut in interest rates from 4.75 per cent to 4.5 per cent. As well as providing relief for businesses, the cut will help thousands of people with mortgages who will see their monthly payments fall. A homeowner with a £300,000 tracker mortgage will see monthly repayments fall around £43 from £1,710 to £1,667.