Why small drop in inflation is big relief for Rachel Reeves: The Yorkshire Post says

A 0.1 per cent drop in inflation may not sound like much but the marginal figure is one that may prove particular significant for Rachel Reeves.

After a week of growing criticism, rising Government borrowing costs and falls in the value of the pound against the dollar, questions were being asked of Prime Minister Keir Starmer as to whether the Chancellor’s job was at risk.

While such speculation always appeared over-egged, Ms Reeves will undoubtedly have breathed rather a large sigh of relief when new statistics published on Wednesday morning showed inflation had unexpectedly dropped in December to 2.5 per cent from 2.6 per cent in November.

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The figures are not likely to be noticed when it comes to the average person’s day-to-day household bills, but they contributed to a drop in Government borrowing costs and the pound recovering some of its strength against the dollar.

Chancellor of the Exchequer Rachel Reeves speaking in the House of CommonsChancellor of the Exchequer Rachel Reeves speaking in the House of Commons
Chancellor of the Exchequer Rachel Reeves speaking in the House of Commons

It also paves the way for a further cut in Bank of England interest rates next month – one of the most visible indicators to the general public of how the country’s economic picture is progressing.

There are many more challenges on the horizon for the Chancellor, with tax changes from the Budget on businesses coming into force and being expected to lead to price rises for consumers, as well as questions over what Donald Trump’s tariffs plan for the US will mean for global trade.

Even Labour’s staunchest supporters would accept neither the Chancellor nor the new Government more generally has had the most auspicious start to its time in power and ultimately they will be judged on whether it can deliver economic growth and improve public services as has been promised.

But these figures are an important short-term shot in the arm for Ms Reeves which should squash speculation about her immediate position.

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