As the Chancellor of the Exchequer Jeremy Hunt congratulated his Government on the latest figures showing a decline in the rate of inflation, two of Scotland’s leading entrepreneurs welcomed the announcement with strong notes of caution.
Sir Tom Hunter said: “Inflation in October was at 4 .6%, down from 6 .7 % in September. PM Rishi Sunak said he would halve inflation and so it looks as if he’s going to do that. Already, some great minds are saying: ‘Oh, there might be some interest rate cuts!’ and there are economists making similar predictions.
“However, we should remember economists predicted nine out of the last three recessions! That aside, they are saying interest rates might go from today’s 5 .25% to about 4.6 % by the end of 2024. Well, I really don’t know about that.”
Speaking on the Go Radio Business Show, he added: “Trying to predict the future is difficult. It’s good that inflation is coming down but I really do feel a tightening up of the economy.
“A lot of business people are saying to me: ‘Look, it’s just getting tougher.’ This reflects the very real lag between putting up interest rates and this actually hitting the real economy.”
His show co-host Lord Wille Haughey had predicted the Government would get the inflation rate below five per cent before December.
“So I was six weeks out,” he said, “but well done! All of this can only help in business terms. But you’re right: I don’t think there is going to be the direct correlation we saw with interest rates going up and inflation going up.
“As inflation heads down, I think we’ll be lucky if interest rates go down.
“It’s interesting to see UBS are talking about dramatically reducing their rate, which would be absolutely brilliant.
“Specifically on inflation, most of the change is due to fuel and energy prices falling but the prices of everyday life are still going up in some instances.
“Positive change is not going to trickle down to consumers as fast as some people might think. It’s not going to make a huge difference!”
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