Yesterday, Rishi Sunak announced a £15bn relief package for low income/vulnerable households in an attempt to ease the burden of escalating inflation. The package will be partially funded by a new temporary windfall tax applied to energy companies as they report stellar profits due to rising fuel costs.
The fiscal support will certainly be welcomed by Bank of England (BoE) officials who are tasked with the unenviable task of hiking rates into a slowing growth environment to get a hold on inflation which last printed at 9.1%. By design, fiscal and monetary policies operate independently from one another but can achieve desirable results when policy outcomes are aligned. In this case, the fiscal support eases the pain caused by higher interest rates for low-income earners, allowing the BoE to continue its fight against inflation.
