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Weekly review: ‘Planned’ Rishi Sunak’s financial credibility could soon be lost

Ronald Reagan once thought that the scariest word in the English language was “I’m from the government, so I’m here to help.” Yesterday, the UK prime minister promised, “I totally, 100% agree. President Reagan, who lives in California, would have considered it positively evil, as would our Prime Minister.

Still, this is the best attempt to reassure Mr. Sunak when he spoke at another “PM Connect” event at the IKEA factory in Kent, relying on its much-touted financial credibility. was an attempt. The routine of reassuring Prime Minister Rishi, whose forearms were exposed, also had a serious economic rationale. Mr. Sunak predicted a reckless situation to thwart an inflationary doom spiral, in which inflation is further accelerated by being informed by enraged consumers chasing runaway price increases. However, PM Connect was remarkably flat, even though the behavioral impact of an overheating economy may have made such performance necessary. You don’t have to be a “big government” critic like Reagan to be skeptical.

Of course rishi snack dark wednesday Beginning with the ONS cost of living bulletin, the Bank of England Monetary Policy Committee raised interest rates to 5% on Thursday. That was a bigger rally than some expected, but economists are used to being misguided by full-blown stagflation in the UK.

The central bank’s MPC has raised bank rates for the 13th time in a row, but inflation has not lived up to expectations since Mr. Sunak announced his first pledge to halve rates in January. So the routine of the UK avoiding a disinflation target and the Bank of England responding appropriately is well known. Economists now expect the benchmark rate to reach 6% by the end of the year. This means that if Mr. Sunak finally hits his arbitrary inflation target, the UK will raise interest rates even higher in the process, creating even more angry mortgage holders.

As expected, the UK’s economic woes were the theme chosen by Keir Starmer for this week’s Prime Minister’s Q&A. “As usual, this honorable gentleman is ignorant of the global macroeconomic situation,” said Mr. Sunak, who was held accountable by the government amid typical British malaise.

But Sunak’s very personal pitch at Thursday’s PM Connect event has caused ripples in the global blame game. Mr Sunak insists on the one hand that the UK crisis is international and on the other hand he is “100% on it” and can solve it. The message focuses on the broader issue of Sunak’s credibility on economic policy. Since October, Sunak has relied on it to make up for its unclear political identity.

The prime minister clearly imagines that he has a mission to mitigate Britain’s negative economic impact, but this is the result of the post-mini-budget political backdrop that pushed him into Downing Street. As a result, economic indicators on inflation, debt and growth will occupy one to three of his “five pledges” to the government. This raises some deep questions. How is Mr. Sunak prepared to stress almost entirely his personal mission to put Britain back on its feet while blaming global factors for the cause of the problem? How does it reconcile with the reality that it is the Bank of England, not the 10th, that has the policy leavers involved?

The ill-fated Foreign Secretary James Cleverley, who was tasked with dealing with the media on Thursday, would not have cooperated with his boss’s pitch on the economy during a car accident interview with the BBC. Asked six times how the prime minister plans to curb inflation, he deftly stumbles and shuts his mouth. The Foreign Secretary, who first cited interest rates before being reminded of the Bank of England’s independence, said at best, “We are well aware that increased government borrowing is one of the things that will cyclically increase inflationary pressures. I’m doing it.”

Mr Cleverley’s confusion highlights the lack of a clear policy path other than a mere suspension of tax cuts voters might get to ease Britain’s inflation problem. (It’s also a well-known fact that the lack of commitment to tax cuts provokes the Trussists, who are still scattered within the Conservative Party). In fact, the government’s best strategy against inflation is either to direct our thoughts and prayers directly to Andrew Bailey, or to get rid of him. Despite Sunak’s vows, it is of course the responsibility of the Bank of England to keep inflation out of the system.

After all, that is the logical crux of Mr. Sunak’s financial credibility problem. Halving inflation is the number one promise in his bullet point vision for his administration. If this fails, another Bailey dossier, it will effectively hand over the next election to Labor. Sunak thus finds himself the hostage of the promise. He won’t be able to hit the ballpark target of halving inflation by the end of this year.

In fact, according to a Survey poll, 40% of people hold the government responsible for curbing inflation, while 39% expect the Bank of England to be responsible. Not surprising. Prime Ministers have taken to podiums across the country against the backdrop of a pledge to “halve inflation” written in bloc capitals. That means Sunak is sitting still with no obvious policy tools at his fingertips, while his economic credibility is eroding and falling victim to the altar of a fussy New Year’s election strategy.

So with Rishi Sunak subtly cursing Mr. Reagan and saying Mr. Reagan is here to help, voters will increasingly link the deterioration of household balance sheets to the prime minister’s inaction. Even if the prime minister were to veer against the Bank of England in the future, voters would already be aware that he was to blame.

All in all, Sunak will pay a high political price for an inflation-focused campaign. And as the economic downturn in the UK deepens, I expect the prime minister’s infamous five promises to be significantly reduced.

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https://www.politics.co.uk/week-in-review/2023/06/23/week-in-review-on-it-rishi-sunaks-economic-credibility-could-soon-be-shot/ Weekly review: ‘Planned’ Rishi Sunak’s financial credibility could soon be lost

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