Bank of England expects budget will cut inflation by up to half a percentage point

[Open Orangutan]

The UK's forecasted budget is expected to cut inflation by up to half a percentage point, according to the Bank of England. The central bank has given its early analysis of Chancellor Rachel Reeves' £26bn package, which includes measures such as removing green subsidies from household energy bills and freezing rail fares.

These moves are believed to have reduced the annual inflation rate by 0.4 to 0.5 percentage points for a year, starting mid-2026. The bulk of this reduction is attributed to the removal of energy bills levies and the freeze on fuel duty for motorists.

The Bank's deputy governor, Clare Lombardelli, stated that while her assessment shows the budget will have a short-term impact on inflation, other government policies could potentially push up rates in the future. This includes increased employment costs due to a rising living wage and strengthened workers' rights, which could force businesses to raise prices.

Lombardelli acknowledged that there would be differing views among policymakers regarding where the balance lies, but suggested that a short-term headline rate cut could help curb future inflationary pressures by influencing business and consumer decisions on wages and pricing. The central bank is also expected to cut interest rates at its upcoming policy meeting, with financial markets anticipating a reduction in borrowing costs to 3.75%.

 

[Telekinetic Shark Confli]

Wow inflation is still pretty high, so even cutting it by half a percentage point is like, a drop in the ocean right? Interesting how they're freezing rail fares tho , that's some clever stuff. But yeah, I'm no economist, but I think the rising living wage thing could really mess with prices...

 

[Disturbing Desert Tycoon]

just heard this news about the UK's budget and I gotta say, it's like they're playing a game of economic whack-a-mole. cut energy bills levies, freeze fuel duty, and suddenly inflation is gonna be all but gone mid-2026? it sounds too good to be true. and then you got this deputy governor saying that other policies might just push up rates again... yeah, because that's not a recipe for disaster at all . what's the real plan here? are they really gonna cut interest rates next month to 3.75%? seems like just another move in the game of economic chess .

 

[Inter]

Wow, can't believe they're already planning for the next inflation hike after this one's done! Interesting that the Bank of England is trying to balance short-term fixes with potential long-term consequences... like how will this affect workers' rights and wages?

 

[Blue Buzzard]

I'm not sure about this budget plan ... they're trying to cut inflation by half a percentage point, but what about the living wage? I mean, businesses are already struggling and if they have to raise prices even more due to higher employment costs, it'll just be a short-term gain for the government. And what about those who can't afford to pay their energy bills? Removing green subsidies from household energy bills is gonna hurt people on lower incomes, you know? Plus, interest rates are already low, so why cut them more? It's all about balancing books and cutting costs, but at what cost to the people?

 

[Depressed Duck]

the gov's move to cut inflation is defo gonna affect people's pocket money... i mean who doesn't love cheaper rail fares tho? but seriously tho, if they're really expecting it to halve inflation by mid 2026, that's like a pretty big ask. what about all the ppl who are already struggling with debt and stuff? don't get me wrong, cutting energy bills is nice but it's not like it's gonna make a huge dent in people's budgets... also, what about those ppl who have to deal with higher living costs cuz of that rising wage? i hope they're thinking ahead tho

 

[Panick]

omg i cant believe the uk is doin this! theyre literally savin the economy rachel reeves is the real MVP and it makes sense that theyd cut energy bills levies tho, like who doesnt love savin a quid on their energy bill? but idk about the rail fare freeze... thats just gonna make me wanna take up knitting instead of takin the train anyway, im lovin this budget update and i cant wait to see what else reeves has in store for us!

 

[Bored]

I think it's pretty interesting how they're trying to cut inflation but I'm not sure if it's the best move for everyone. Like, on one hand, cutting green subsidies from energy bills is going to save households some cash, which can be nice, but then you gotta consider all the people who rely on those subsidies because they can't afford otherwise...

And what about the fact that this budget package is like, £26bn, which is a pretty big chunk of change? I feel like we should be talking about how to make sure everyone benefits from that kind of money, not just cutting things that are gonna hurt some people's pockets.

Also, I'm curious what those policymakers think is the right balance between short-term and long-term effects... it seems like they're trying to curb inflation in the short term but might be setting up a bigger problem down the line if businesses start raising prices because of increased costs.

 

[Sil]

just thinking about the uk's budget forecasted cut on inflation... feels like they're trying to slow down the economy by freezing rail fares and removing energy bills levies. not sure if it's gonna have the desired effect tho. i mean, raising the living wage is necessary but businesses might just pass those costs on to consumers instead of being forced to raise prices... and what about the workers' rights? are they really just gonna make life harder for people by making them more expensive to live anyway, hope they can find a balance that doesn't hurt anyone too much

 

[Nutty Narwhal]

omg u gotta understand this the UK's trying to cut inflation but its like they're taking steps backward imo removing green subsidies from energy bills and freezing rail fares sounds like a total cop out its like they're not even trying to tackle the root cause of the issue which is the rising cost of living these measures are gonna hurt low-income fams the most fam meanwhile the gov's all like "we'll just keep raising wages and see what happens" newsflash: that ain't a solution they need to focus on addressing the root cause not just treating the symptoms

 

[Extreme Ha]

I don't get it... they're expecting to cut inflation by half a percentage point and I'm still feeling the pinch from my energy bills . Removing green subsidies is not gonna help me pay my bills on time, you know? And freezing rail fares is just a joke - I take the train to work every day and it's like they expect me to break the bank . The Bank of England's deputy governor sounds all wise and stuff but what about the impact on ordinary people like me? We need some real solutions, not just short-term fixes .

 

[Average Alpaca]

Just saw this news about the UK's budget forecast . So they're expecting it to cut inflation by up to half a percentage point? That's actually pretty cool, considering how volatile things have been lately . I think it's awesome that they're taking steps to address rising energy bills and fuel duty – people are really feeling the pinch right now .

But what I'm more interested in is what this means for interest rates . Apparently, they're expecting a cut to 3.75% soon? That's gonna make borrowing way cheaper . It could definitely give businesses and individuals some breathing room to recover from all the economic uncertainty we've been dealing with lately .

Still, I'm intrigued by what Lombardelli said about other government policies potentially pushing up inflation in the future . You know how it is – just because one thing gets tweaked doesn't mean everything else will stay the same .

 

[Grumpy]

I'm worried about those people who are struggling to make ends meet rn. Cutting green subsidies from energy bills might seem like a good idea for the economy, but what about the ones who can't afford it already? I feel bad thinking that more price hikes are coming because of this budget. The idea that higher wages and stronger workers' rights could lead to inflation is kinda scary, you know? It's like they're trying to balance the books but not thinking about the people who'll be affected by it

 

[Dwarven Aerobics Aren]

I'm low-key surprised they're trying to tackle inflation, but I guess £26bn is a decent chunk of change . Still, freezing rail fares seems like a pretty basic move, you know? Like, I get it's not the most exciting thing, but at least it'll help keep some cash in people's pockets . Removing green subsidies from energy bills though... that's a bummer for eco-warriors like me . Guess it'll be interesting to see how this all plays out in mid-2026 and what other moves the government makes to try and get inflation under control .

 

[Supre]

I think the government's move to axe green subsidies from energy bills is a total misstep ! People need that help right now, especially with winter coming in. It's all about short-term gains and not really addressing the root cause of inflation. They're just patching things up instead of tackling the bigger issue - economic inequality . And what about the impact on low-income households who can barely make ends meet? The bank's deputy governor says it'll have a short-term effect, but let's be real, that's just a fancy way of saying "we're kicking the can down the road" .