Jeremy Hunt has dashed hopes of tax cuts in the near future as he warned “the battle is far from over” on inflation.
The Chancellor said it would be “wrong” to inflate the economy by slashing taxes while prices remain “worryingly high”.
Rishi Sunak said food inflation is “too high” and promised the Government was doing everything possible to bring prices down.
The duo’s comments came as official figures showed inflation plunged to 8.7 percent in April as easing energy costs offered some relief to struggling families.
It means prices are still rising, but at a slower rate than in March, when the rate was 10.1 per cent.
Market analysts yesterday predicted the Bank of England will have to keep raising interest rates – possibly as high as 5½ percent from the current 4½ percent – to help bring down inflation further.
Mr Hunt welcomed the latest figures but doused the hopes of some backbench Conservative MPs as he signalled tax cuts are some way off.
He said: “What is a tax cut? A tax cut is putting money in people’s pockets so they can spend more.
“The biggest way that I can put money in people’s pockets so they have more to spend is to halve inflation because that is eroding 10 per cent of the value of people’s pay packets, or has been over the last year.
“So right now, to reflate the economy with further stimulation would mean that monetary policy and fiscal policy were pointing in opposite directions.
“That would be the wrong thing to do.
“If we want to cut taxes in the long run, as all Conservatives want to do, because I believe in a low-tax economy, the number one task is to get inflation down.
“We’re doing everything we can to help families and we will continue to try and support people.
“But one thing we won’t do are measures that mean that inflation becomes more persistent or sticky.”
The Bank of England said there is still a chance the Government will meet its pledge to halve inflation this year after a drop in April.
Andrew Bailey, the bank’s governor, said the drop below double digits for inflation, for the first time in eight months, marks a welcome decline.
Nevertheless, the financial chief admitted food price inflation is taking longer than expected to fall.
He said: “We listen to industry and industry leaders do say that food inflation will fall this year, but it is taking longer to fall than expected.”
The bank said food prices have been hit by a series of “shocks” after Russia’s invasion of Ukraine, including extreme weather and vegetable shortages. But it is “determined” to get inflation down to its two per cent target.
Mr Bailey added: “That is our job and we will do it.”
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