From the Guardian · · 1m 20s
Burnham's cost of living promise faces rate rise reality
The PM's pledge of breathing space is threatened by Middle East conflict pushing inflation and interest rates higher.
In brief
The PM's pledge of breathing space is threatened by Middle East conflict pushing inflation and interest rates higher. Andy Burnham's cost of living measures risk being overwhelmed by rising inflation and higher government borrowing costs driven by geopolitical tensions. Originally reported by the Guardian.
Burnham promises breathing space
The new PM kicked off with modest cost of living measures like capping bus fares and slashing VAT on electricity bills.
Middle East war reignites oil shock
The resumption of the Iran conflict has pushed global oil prices back above one hundred dollars a barrel, with painful effects across Europe and Asia.
UK inflation jumps to 3.1%
August inflation hit 3.1%, driven by rising fuel prices, and the Bank of England now expects inflation above 4% in the first quarter of 2027.
Bank signals future rate rises coming
The Bank of England held rates at 3.75% but warned that if Middle East conflict persists, policy may have to tighten with future rate increases.
“If the conflict in the Middle East persists for an extended period, as appears to be the case, it is likely that policy may have to tighten.”
Mortgage rates already jumping
Even without a rate rise from the Bank, mortgage rates have already jumped as markets contemplate a period of higher inflation.
Double squeeze on government spending
Higher inflation threatens to overwhelm the benefits of Burnham's handouts, while higher interest rates on government borrowing increase the costs of future consumer protection measures.
The essence
Andy Burnham's cost of living measures risk being overwhelmed by rising inflation and higher government borrowing costs driven by geopolitical tensions.
