Striking a balance between tax cuts and inflation is no easy challenge

The Times

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Narrated by Mehreen Khan

The game of chicken between financial markets and central bankers took another turn last week, when investors rejoiced in figures showing sizeable falls in inflation last month in the United States, where prices grew by 3.2 per cent, in the eurozone, with inflation at 2.9 per cent, and in Britain, where it stands at 4.6 per cent. Money markets were so taken with the strength of disinflationary forces that they stepped up their bets on interest rate cuts in early 2024. An easing in policy by the US Federal Reserve, the European Central Bank and the Bank of England is pencilled in for the spring rather than the end of the year, if investors’ forecasts are to be believed.

We’ve been here before, of course,