Monetary tightening is a harsh remedy, but it is reassuring to see evidence that the process is working. The latest UK labour market, house price and retail sales numbers suggest that high interest rates have been cooling demand. Most importantly, inflation has fallen sharply. This week the Chancellor will set out new fiscal plans. Disinflation may give him scope to argue that the economy is heading in the right direction, even while tax and spending options remain unenviable.

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