Sunak claims ‘light at end of tunnel’ on inflation as Bank of England set to raise rates again

His comments came as the Bank of England prepared to hike interest rates to the highest level since February 2008

Rishi Sunak has claimed families can see “the light at the end of the tunnel” on inflation just hours before the Bank of England is set to hike interest rates to their highest level in 15 years.

The prime minister restated that cutting inflation to around 5 per cent by the end of the year was his “top priority” and insisted the government was “making progress”.

And despite admitting progress is not as fast as he or anyone would like, Mr Sunak said “we are heading in the right direction”.

Highlighting his tenure as chancellor during the pandemic, Mr Sunak said: “You’ve got to trust me … I know how to manage the economy for everyone.

“Inflation is coming down and I think people can see light at the end of the tunnel,” he told LBC during a phone-in with listeners.

But one mortgage holder bit back, telling Mr Sunak he did not want to be stuck paying off his mortgage “until I am in the grave” because of spiralling interest rates.

Economists have also accused the PM of trying to “claim credit” for a fall in inflation which was “nothing to do” with his policies and had instead been helped by falling global food and energy prices.

And senior Labour MP Darren Jones said: “It’s a bit rich for Chopper Rishi to jet off to his holiday home in California telling the rest of us with mortgages to pay that there’s light at the end of the tunnel.

“What he should be telling us is what he’s doing about it. How is he clearing up the economic mess the Tory party has made? Telling us to just hold tight is disrespectful and offensive.”

Inflation stood at 7.9 per cent in June, with the price of food and drinks specifically rising at 17.4 per cent year on year.

The figure was down from 8.7 per cent a month earlier, and the lowest rate since March 2022, but it set the stage for a further interest rate hike this week.

After a series of punishing increases in the Bank of England’s base rate, which has caused the cost of mortgages and other borrowing to soar, it stands at a 15-year high of 5 per cent.

It is widely expected to be hiked by a further 0.25 percentage points on Thursday to 5.25 per cent – a level not seen since February 2008.

Mr Sunak said on Wednesday: “I know families are struggling with the cost of living, that is why I set out as my top priority to halve inflation.

“We are making progress. Of course, is that as fast as I would like? No. As fast as anyone would like? No.

“But the numbers most recently showed that we’re heading in the right direction, inflation is coming down.”

The Bank of England is expected to raise interest rates to 5.25 per cent on Thursday (Getty Images)

Economists rounded on Mr Sunak for the claim, branding it “absurd” for the government to take credit.

A former senior government economist told The Independent there was “no doubt” inflation is coming down, but said it has “nothing to do with the prime minister”.

Jonathan Portes, who served as the chief economist in the Cabinet Office under Gordon Brown, pointed instead to a fall in global food and energy prices.

“If you’re Rishi Sunak, there never was a tunnel and you do not have anything to worry about,” he said. The same is true for other high earners, he added.

But he said: “For large parts of the rest of the country facing higher mortgage payments, paying private sector rents and people in lower paid jobs whose wages have not kept up with inflation, the fact it is coming down is good but it does not mean their living standards will increase.”

Meanwhile, economist Peter Levell at the Institute for Fiscal Studies told The Independent it would take years for household incomes to recover to pre-cost of living crisis levels.

“In terms of inflation, the story is that things will stop getting worse in the next couple of months,” Dr Levell said.

“But in terms of reattaining levels of income we had before this crisis, that will take a lot longer,” he added.

The New Economics Foundation (NEF) think tank accused the PM of trying to “claim credit for a job well done”, noting that inflation was “already set to fall”.

NEF head of economics Jeevun Sandher told The Independent: “It is absurd for the prime minister to claim there is ‘light at the end of the tunnel’ just because inflation is likely to fall to less than 5 per cent.

“Families were already struggling to get by before this latest cost of living crisis, with a third unable to afford the basics.”

Mr Sander added that, despite inflation easing, the number of families struggling to get by will increase by the end of next month.

On Wednesday, Mr Sunak was asked by a mortgage holder, whose monthly payments are set to jump from £1,500 to £2,800 because of soaring interest rates, for help.

The caller, who said he did not want to be stuck “paying it off until I am in the grave”, said he was being “unfairly punished” and pleaded with the PM to act.

Mr Sunak highlighted the government’s mortgage charter, agreed with major lenders, under which borrowers can switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments.

Mr Sunak replied saying the best way he could help was to “bring inflation down”.