Ministers await inflation data as Reeves defends response to market turbulence

Chancellor Rachel Reeves is awaiting inflation data as the Treasury continues to grapple with rising borrowing costs and market turmoil.

The latest indicator of the economy’s health is expected on Wednesday morning, and December’s rate is likely to remain at 2.6%, the same as the previous month.

The Chancellor is dealing with a period of turbulence in the UK financial markets, as the value of the pound has dropped sharply and the cost of Government borrowing has risen to decades-high levels.

Her problems have been further compounded by the resignation of one of her ministers at the Treasury, Tulip Siddiq, following an investigation into links to her aunt’s political movement in Bangladesh.

Amid the market turmoil – which puts the Government’s plans for the nation’s finances at risk – Ms Reeves was adamant of the need to swiftly search for economic growth.

“We have seen global economic uncertainty play out in the last week. But leadership is not about ducking these challenges, it is about rising to them,” she told the House of Commons.

In a statement to MPs following her China trip, the Chancellor added: “The economic headwinds that we face are a reminder that we should – indeed, we must – go further and faster in our plan to kickstart economic growth.”

Agreements struck in Beijing and Shanghai, where Ms Reeves held discussions on trade and investment, would be worth £600 million to the UK over the next five years, she said.

But the Tories criticised the visit, with shadow chancellor Mel Stride claiming a “black hole” had opened in the public finances while Ms Reeves was “absent from her station”.

The Chancellor remains committed to her fiscal rules, which include meeting day-to-day spending through tax revenues.

But rising borrowing costs eat into the money available for public services, leaving Ms Reeves faced with either slashing spending or hiking taxes again, something she has pledged not to do.

The expected lull in inflationary pressures in the Office for National Statistics’ latest figures is likely to be welcomed by ministers as they attempt to steer the UK economy towards a brighter future.

But economists from research company Pantheon Economics have warned this is likely “only a temporary reprieve”, with inflation building again in 2025.

Elsewhere, the Government’s ethics adviser, Sir Laurie Magnus, said it was “regrettable” that Treasury minister Ms Siddiq was “not more alert to the potential reputational risks” of her links with the deposed prime minister of Bangladesh, her aunt Sheikh Hasina.

Ms Siddiq was not found to have broken the ministerial code after Sir Laurie investigated reports of her use of properties in London linked to her aunt’s allies, and after being named in a Bangladeshi anti-corruption probe into the ex-PM.

She quit the Government to avoid becoming a “distraction”, she told Sir Keir Starmer in her resignation letter.