Interest rates would rise faster if Truss beats Sunak, economists say 

LIZ Truss’ economic plan would fuel inflation and prompt quicker interest rate increases from the Bank of England (BOE) than if Rishi Sunak led the nation, a poll of economists showed.

Eight of the 9 economists surveyed by Bloomberg said Sunak, the former chancellor of the exchequer, would handle the economy better than Truss, with 1 preferring the foreign secretary.

Truss and Sunak are battling to replace Boris Johnson as prime minister, with economics the primary battleground so far. They’re having to appeal to members of the ruling Conservative Party, who have faulted Sunak for raising taxes during his time in office.

Truss has promised immediate reductions in taxes on companies and personal income, a measure that would probably stimulate the economy and boost inflation. The central bank, economists say, would probably respond by hiking rates, which are already at their highest point since 2009.

Patrick Minford, an economist advising Truss, told the Times newspaper that tax cuts would boost the economy, and interest rates should probably rise to a more “normal” level of around 7 per cent. That’s well above the BOE’s current benchmark lending rate, which now stands at 1.25 per cent, the highest since 2009.

Sunak has said he’d cut taxes only when the public finances are strengthened, suggesting those reductions probably won’t come before the autumn of 2023. BLOOMBERG