Hunt's tax cuts mean interest rates won't fall until summer 2024, economists warn

For free, real-time news alerts sent directly to you in your inbox sign up for our breaking news emails sign up for our free news emails please enter a valid email address please enter a valid email address i would like to receive by email offers, events and updates from The Independent. Read our privacy notice{{ #verifyErrors }}{{ message }}{{ /verifyErrors }}{{ ^verifyErrors }}Something went wrong. Please try again later. {{ /verifyErrors }>

Jeremy Hunt's decision to cut national insurance contributions risks keeping interest rates high until summer 2024, economists have warned.< /p>

The Chancellor cut National Insurance Contributions (NIC) by 2%, but financial experts say the Bank of England may now have to keep rates high for longer.

The Office for Budget Responsibility (OBR) said there would be higher levels of inflation than before. expected, revising its estimates after Mr Hunt's autumn statement.

There are now fears that the central bank will have to keep the base interest rate at 5.25 percent until summer, despite widespread hopes that it would be reduced. in the spring.

“Even if the degree of additional fiscal support is somewhat more limited than that of March, it helps, at the margin, to support the case for keeping interest rates unchanged longer,” George Buckley, an economist at Nomura, told The Telegraph.

Benjamin Nabarro, an economist at Citi, also predicted a delay in lowering interest rates. interest from the Bank of England, predicting that Mr Hunt will cut taxes again in the spring.

"We expect both [tax cut packages] to push back the start of the cuts Bank of England tax cuts in the third quarter," he said, expecting tax cuts to tip the scales. towards a more "hawkish" stance on interest rates.

Richard Hughes, chairman of the OBR, suggested the watchdog was relaxed about the potentially inflationary impact of the statement of autumn. “Essentially, because borrowing is unchanged,” he explained on Thursday.

The Chancellor and Prime Minister of Nissan's Sunderland plant < /p> (Getty)

At a post-statement briefing with reporters, Mr Hughes declined to say whether inflation could have fallen more quickly without Mr Hunt's tax cuts.

But the OBR has revised its official estimates – its...