T here was only ever an outside chance that the Conservatives would win the next general election after the tumultuous period that resulted in Rishi Sunak becoming prime minister last October. The events of the past week mean the prospect of a fifth Tory victory is now vanishingly small.
Ironically, things started so well for the government. On Tuesday, the chancellor, Jeremy Hunt, luxuriated in the praise bestowed on the UK from the International Monetary Fund as it upgraded its growth forecasts for the economy.
Kristalina Georgieva, the IMF’s managing director, came bearing three gifts. She said the Fund was no longer predicting a recession for the UK this year; she confirmed that the UK would no longer be the worst-performing country in the G7: and she praised Hunt for his handling of the economy.
With the following day’s figures for the cost of living expected to show a sharp drop in the annual inflation rate, a narrow path to victory for Sunak and Hunt was just about discernible. Optimism lasted less than 24 hours.
At 7am on Wednesday the Office for National Statistics published figures showing that while inflation had indeed fallen, it had not dropped by nearly as much as the financial markets had been anticipating. Even worse, core inflation – a cost of living measure that excludes items such as food and fuel – rose.
Previously, the City had thought that interest rates were at or close to a peak. Twelve successive increases have taken the official cost of borrowing from 0.1% to 4.5% and the markets were split between those who thought the Bank of England would leave them unchanged and those who thought one more quarter-point rise would be deemed necessary to bring inflation back to its 2% target.
The mood has nowRead more on theguardian.com