A difficult task just got a little easier for the Bank of England, following Chancellor of the Exchequer Rishi Sunak’s announcement A 15 billion pound ($19 billion) relief package was announced on Thursday. The measures, including subsidies on energy bills for every UK household as well as one-off grants for pensioners and welfare recipients, mark a dramatic U-turn by the government as the cost of living crisis deepens . But the arrival of fiscal cavalry is mitigating the potential impact on growth, freeing up the central bank to focus on tackling soaring consumer prices that threaten to undermine the financial health of those most in need.
At his latest policy meeting, BOE Governor Andrew Bailey raised the prospect of a slowing economy, paving the way for a dangerous economic backdrop as inflation has already hit a 9 % in 40 years and is expected to reach double digits in the coming month. Sunak’s rediscovery of the magic money tree, missing since the end of the pandemic relief program, belatedly reverses some of the economic damage inflicted by tax hikes he introduced earlier this year on businesses and workers. If the government is aware of the risk of recession, the central bank can continue to fight price increases.