Bank of England raises alarm over new tax raid

Group 1 - The Bank of England has decided to hold interest rates at 4% amid persistent inflation and wage pressures, with expectations that inflation will return to the 2% target gradually [4][67][82] - The Bank plans to reduce its balance sheet by £70 billion over the next year, a slower pace compared to the previous £100 billion reduction, in response to concerns about the impact on the bond market [7][24][65] - There are widespread fears among businesses regarding potential tax increases in the upcoming Budget, with estimates suggesting the Chancellor may need to find between £20 billion and £50 billion in tax rises or spending cuts [6][32][60] Group 2 - The recent inflation rate remains at 3.8%, which is significantly above the Bank's target, and is attributed to factors such as rising food prices and increased employer National Insurance contributions [10][11][61] - The Bank's agents have reported a theme of "consumer caution," with businesses worried about the impact of the upcoming Autumn Budget on economic confidence [5][60] - The Chancellor has indicated that measures are being explored to keep costs down for households, including a potential freeze on fuel duty and the removal of VAT on gas and electricity bills [2][8] Group 3 - The Bank of England's decision to slow down quantitative tightening is seen as a potential boost for the Chancellor, as it may help lower yields on government bonds, thereby easing borrowing costs [33][70][72] - Concerns have been raised about the impact of the Bank's bond sales on the government's gilt issuance strategy, with calls for closer coordination between the Bank and the Debt Management Office [25][41][58] - The current economic environment is characterized by high inflation expectations, which could complicate the Bank's ability to cut rates in the near future [19][27][54]