In her Spring Statement, Chancellor Rachel Reeves struck a cautiously optimistic tone as she declared the Bank of England’s two per cent inflation target “achievable” – though not immediate.
The announcement follows news that UK inflation fell to 2.8 per cent in February, down from 3 per cent in January, offering some relief after the highs of 11.1 per cent in October 2022.
Despite the fall, inflation remains above target.
The Bank expects a temporary spike to 3.7 per cent later this year, driven by rising energy prices and utility bills, before a slow return to target by 2027.
For investors, this shifting picture has immediate consequences.
With interest rates currently at 4.5 per cent, and future cuts expected to be “gradual and careful”, traditional safe-haven assets such as gilts and savings accounts may see only modest gains.
Meanwhile, equity markets may remain volatile as businesses navigate higher input costs and cautious consumer spending.
Reeves has reiterated her commitment to “fiscal rules” and criticised past Conservative decisions, particularly the Liz Truss mini-Budget, for destabilising markets.
By restoring a surplus of £6 billion by 2027–28, rising to £9.9 billion by 2029–30, she aims to build investor confidence in the UK economy’s resilience.
With household incomes forecast to rise and GDP growth revised upward from 2026 onwards, your long-term investment strategies may benefit from a more stable economic outlook.
However, with inflation still elevated and geopolitical uncertainty lingering, we believe that diversification remains key.
In the short term, cautious optimism is warranted.
As the Chancellor puts it: the road to two per cent may be long, but it is within sight.
We recommend investors factor in that journey – and its bumps – when plotting their next move.