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

Shoppers on Oxford Street in London. Business leaders have cautioned that higher employment costs could force them to push up prices. Photograph: Andy Rain/EPA

The Bank of England expects Rachel Reeves’s budget will reduce the UK’s headline inflation rate by as much as half a percentage point next year.

In a boost for the chancellor after last month’s high-stakes tax and spending statement, Clare Lombardelli, a deputy governor at the central bank, said its early analysis showed the policies would lower the annual inflation rate by 0.4 to 0.5 percentage points for a year from mid-2026.