(Bloomberg) -- UK Chancellor of the Exchequer Jeremy Hunt said the prospect of interest rate cuts later this year would lift the mood of voters, hinting that Prime Minister Rishi Sunak won’t call a general election until the autumn.

“The feel-good factor as interest rates start to come down, as people start to feel higher real disposable incomes, will be stronger in people’s minds come the early autumn than it is now,” Hunt said on Tuesday in a Bloomberg TV interview. “People have been through a very bruising period.”

Hunt’s remarks are likely to focus attention on the prospect of an election later in the year. Sunak has already said he’s working on the assumption a vote will be held in the second half of 2024 — though he can call one for as late as January 2025, and speculation persists in Westminster around the possibility of a summer election.

The chancellor’s assessment of the UK economy came after Bank of England Governor Andrew Bailey suggested in an interview with the International Monetary Fund that the UK might be able to lower interest rates before the US, saying there is more “demand-led inflation pressure” in America than Britain, where there is “strong evidence” of price pressures retreating.

UK inflation is due to average 2.5% this year according to the IMF — above the BOE’s 2% target but in line with other European countries and lower than in the US. Given that progress on tackling inflation, markets are now almost fully pricing in a reduction from the UK’s current 5.25% rate in September.

The latest IMF forecasts - unveiled on Tuesday - also predict the UK will have weaker economic growth this year than any other Group of Seven nation except Germany. The British economy is expected to grow 0.5% this year, compared to a previous estimate of 0.6%, the IMF said. 

The underwhelming economic backdrop is a concern for Sunak’s governing Conservative Party, which trails the Labour opposition by a wide margin that has sometimes exceeded 20 points in recent polls. Hunt and Sunak have sought to change voter sentiment with a series of personal tax cuts over the last 6 months — with little effect so far.

Nevertheless, Hunt said there is still “all to play for” at the election, because “we know in the UK that around a fifth of voters have not yet made up their mind who they’re going to vote for.” 

“What we’re seeing now is much more positive data beginning to come through – very good prospects for the UK going forward,” Hunt said. “That all means our strongest argument to the British people is going to be that having turned that corner, we don’t want to take any risks.”

While Hunt deferred to Sunak on the timing of any election, he said a vote in October would allow for a fiscal event with more tax and spending decisions in September, adding: “we would decide much nearer the time whether that was the right thing to do.” He also said that the days of double-digit inflation of 18 months ago are “well and truly behind us.”

On defense issues, Hunt said a proposal to use seized Russian assets to help fund Ukraine’s war effort is “very intriguing” and that he would discuss the idea with US Treasury Secretary Janet Yellen in the coming days. He also said he expects the UK to have to spend more on its military and that he wants other European countries to do so too.

“We can’t just depend on the United States to defend Europe,” he said. “We need to play our part.”

That’s a view shared by Philip Hammond, the Tory former chancellor and defense secretary. Commenting on a potential reduction in US support for NATO should Donald Trump win the presidential election, Hammond told Bloomberg TV that European countries would have to step up their own military spending.

“We’re heavily dependent on the Americans for many strategic elements of our defense,” Hammond said Wednesday morning. “We would need to invest quite a lot more.”

--With assistance from Tom Rees, Philip Aldrick, Constantine Courcoulas, James Hirai and Francine Lacqua.

(Updates with Hammond comments from thirteenth paragraph.)

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