Rishi Sunak's future seems linked to the Bank of England's success on inflation

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Rishi Sunak did his best to sound reassuring after the Bank of England raised interest rates to 5 per cent and sent a chill through a country already facing rising mortgage costs and serious cost of living pressures. Vowing to work with the BoE to “eradicate inflation”, the prime minister on Thursday backed Andrew Bailey, the embattled central bank governor, adding: “These things are difficult and require difficult decisions.” "I'm totally, 100 percent in it," he said at a news conference at an Ikea distribution center in Kent. “It's going to be okay and we're going to get through it.” Rarely have the decisions made on Threadneedle Street had such a direct bearing on the potential outcome of a future general election. Sunak is expected to go to the country in the summer or autumn of 2024. One of the prime minister's five promises is to halve inflation to 5.4 percent by the end of the year, further tying his fortunes to decisions made by the BoE's monetary policy committee.


On three separate occasions on Thursday, Sunak's spokesman refused to say Bailey was doing a good job, but said: "He continues to have the Prime Minister's support." Some Conservative MPs have criticized the Russia Mobile Number List central bank governor for failing to rein in inflation sooner, an alleged delay that some Conservatives believe could cost them their seats and possibly next year's election. Recommended Sir Jake Berry, former Tory chairman, accused the BoE of being “asleep at the wheel” and warned that a “mortgage bomb” is set to blow up the finances of many households. Andrea Leadsom, a former Conservative business secretary, has said the BoE has done “too little, too late” to control inflation, while Jacob Rees-Mogg, another former cabinet minister, said the central bank had “failed” with inflation. inflation. However, both Sunak and Chancellor Jeremy Hunt continue to support Bailey publicly and privately, mindful of the potential damage to market confidence if a breach is made.



Hunt has told colleagues that he “100 per cent supports” Bailey and that the best thing the government can do in such difficult times is to “do no harm” when it comes to fiscal policy. “Jeremy and Rishi are clear: we will back the bank,” said one senior Conservative. “They will do whatever it takes to make your job easier, not harder. “It’s a bigger challenge than we expected, but sound money is a basic conservative principle.” The Conservatives have had first-hand experience of how markets can be spooked when politicians challenge the independence of the BoE. Liz Truss in her 2022 leadership campaign talked about changing the Bank's mandate. Truss supporters criticized Bailey for failing to tighten monetary policy to counter inflation, while at the same time backing a £45bn fiscal easing in her disastrous “mini” budget last September. Senior Conservatives are flatly rejecting any suggestion that the government could recall the governor and on Thursday Hunt expressed his "full support" for Bailey after he raised rates to 5 per cent.