Reeves’s talk of stability may be misplaced amid Iran war turmoil

Analysis Reeves’s talk of stability may be misplaced amid Iran war turmoil Heather Stewart Attempt to project calm in spring forecast may be short-lived if living costs and unemployment keep climbing Reeves insists Labour has ‘right economic plan’ Business live – latest updates “This government has restored economic stability,” Rachel Reeves told the House of Commons on Tuesday. Yet the chancellor was speaking just moments after MPs had been hearing from the foreign secretary, Yvette Cooper, about plans to evacuate British nationals from the escalating conflagration in the Middle East. Should the violence that has sent energy prices soaring abate, the impact on inflation and economic growth will be short-lived, in which case Reeves’s bold claim about economic stability may just about stand. But if the conflict is prolonged, then the Office for Budget Responsibility’s forecasts will look hopelessly out of date within weeks. The oil price was continuing to climb as she spoke and financial markets have pushed up government borrowing costs, as they bet that central banks will be unable to cut interest rates much more in the face of rising inflation. Lower gilt yields – or interest rates on government debt – were a key reason the forecasts for the public finances have improved since the budget. But these gains will be eroded if the dramatic market moves of recent days are sustained. Reeves had hoped that after a series of missteps and U-turns, this would be the moment she could claim the credit for putting the UK on a more even keel – something she claimed was all the more important given the chaos overseas. “With unfolding conflict in Iran and the Middle East, it is incumbent on me and on this government to chart a course through that uncertainty to secure our economy against shocks and protect families from the turbulence that we see beyond our borders,” she said. She was able to point to the welcome fact that the OBR expects inflation, and public borrowing, to be lowe...