Finance
Bank of England sees budget cutting inflation by around 0.4-0.5 percentage points
Published by Global Banking and Finance Review
Posted on December 9, 2025
1 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on December 9, 2025
1 min readLast updated: January 20, 2026
The Bank of England predicts a 0.4-0.5% reduction in inflation due to Rachel Reeves' budget, effective from mid-2026.
LONDON, Dec 9 (Reuters) - The Bank of England estimates that finance minister Rachel Reeves' budget announced last month will knock off around 0.4 to 0.5 percentage points from the annual rate of inflation from around midway through next year, a top official said on Tuesday.
"We think it will reduce inflation by between 0.4 and 0.5 percent for a year from the second quarter of 2026," Deputy Governor Clare Lombardelli told lawmakers from parliament's Treasury Committee, citing an early analysis from BoE staff.
The Office for Budget Responsibility had previously estimated a 0.4 percentage point reduction to inflation over the 2026/27 financial year as a result of budget policies.
(Reporting by Andy Bruce and David Milliken)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to keep the economy running smoothly.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
The Bank of England is the central bank of the United Kingdom, responsible for issuing currency, maintaining monetary stability, and overseeing the financial system.
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