PwC comments on Chancellor's economic statement

Responding to the Chancellor’s economic statement on 17 October, Barret Kupelian, senior economist at PwC, says:

“The announcement signals the return to the previous Treasury focus on ensuring that public finances should be sustainable in the short-term to provide stability for future growth. The Chancellor used the word ‘stability’ repeatedly throughout his statement today. The impact of this should be gradually felt on lower risk premiums on financial instruments, some of which will flow into the public debt interest expense projections presented by the OBR later on this month. 

“Secondly, the review and potential reform of the Energy Price Guarantee will likely mean that public finances are unlikely to be fully exposed to changes in natural gas prices which are denominated in US Dollars and are volatile which makes them difficult to forecast. Making this liability smaller and more predictive, for example by skewing the support towards those less well-off, makes sense, especially if accompanied by future demand management measures.

“The big question is what the Bank of England will do next. It is still too early to tell as we still don’t have clarity on the full suite of policy measures adopted and likely to come. However, based on today’s announcement it is apparent that there will be much less stimulus in the economy relative to supply. This could mean the pace of monetary policy tightening around interest rates could slow down, relative to expectations after the September mini-Budget.”