Chancellor Rachel Reeves' fiscal measures are designed to restore financial stability but may inadvertently raise inflation and impact interest rates, according to experts.
The OBR indicated that the new budget policies could elevate the consumer price index inflation measure by approximately half a percentage point at its peak, leading to a projection of 2.6% inflation in 2025.
Experts highlighted that an expected rise in inflation, attributable to Reeves' budget plans, mainly stemmed from increased wage growth persistence and a fiscal loosening effect.
Reeves' budget not only raises taxes and increases spending significantly, but also complicates the central banks' approach to managing inflation through interest rate adjustments.
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