Following the Chancellor’s Budget today, speculation is inevitably turning to the Bank of England Monetary Policy Committee’s decision on interest rates in December.

In the government’s official Budget document, it claims that the Budget package will directly cut inflation by 0.4 percentage points in 2026, adding that “This is the biggest near-term reduction in inflation due to government policy ever forecast by the OBR at a single fiscal event, outside of a crisis.”

Laith Khalaf, head of investment analysis at AJ Bell, believes the path is now clearer for interest rate cuts.

He said: “As well as balancing the books and creating economic growth, this Budget will be judged on whether it helps to dampen inflation.

“A few weeks ago, Reeves took to the airwaves in an unusual pre-Budget public statement, and one of the key messages from that statement was a commitment to bear down on inflation.

“This is absolutely the right thing to do because lower inflation would allow the Bank of England to cut interest rates and ease the cost of living.

“That would give consumers and businesses a much-needed shot in the arm, and reduce the enormous cost of servicing government debt.

“From an inflationary perspective, the rise to the minimum wage isn’t helpful, though clearly some good news for lower paid workers.

“However, the cut to household energy bills means that overall this Budget reduces inflation by 0.3% [sic] next year according to the OBR, so the coast is clearer for a loosening in monetary policy.

“It’s now over to the Bank of England to deliver on that score. The Bank is already widely expected to deliver a Christmas rate cut in December, but the Budget’s dampening of inflation should pave the way for more cuts next year.”