The chancellor told Andrew Bailey that claims that near-double-digit inflation was mainly due to the war in Ukraine were less credible now that the government had taken steps to rein in energy bills, a blow to the Bank’s record in controlling inflation. In a letter to Mr Bailey that marked a change in tone from Rishi Sunak, Mr Kwarteng said: “The current high inflation is making it difficult for households to pay their energy bills and meet their other living costs, while further burdening businesses and reducing the certainty they need to grow. “Inflationary pressures are becoming more internal.” He stressed that it is the Bank’s job to ensure that inflation, currently at 9.9%, returns to the 2% target. “I know and expect that the MPC will continue to take the robust action needed to achieve this,” he said. It came as policymakers at the Bank of England warned Britain was already in recession as they raised interest rates by 0.5 percentage points, surprising money markets that had expected a more radical 0.75 point rise. In a further sign of tensions between the new government and the Bank, a Downing Street spokesman disputed claims a recession was already underway, saying forecasts could “fluctuate and change”. Mr Kwarteng’s “unashamedly pro-growth” stance has led to speculation of big tax cuts in Friday’s mini-budget. The close ally of Liz Truss has shaken up the Treasury since taking office this month, including ousting long-time permanent secretary Sir Tom Scholar. Economists at the Institute for Fiscal Studies said Friday’s announcements were likely to amount to “the biggest fiscal event of tax cuts since Nigel Lawson’s 1988 budget”. The chancellor confirmed he is canceling the 1.25 percentage point rise in national insurance (NI) imposed by Mr Sunak, to pay for social care and tackle the NHS backlog. As well as canceling the NI rise from November, saving the average worker £330 next year, the Chancellor will also announce a major red tape designed to speed up infrastructure projects and create new low tax investment zones to promote of economic development. Mr. Kwarteng will announce two “rabbits out of the hat” that have not been mentioned before. Several policy measures originally planned for the autumn budget have also been proposed for inclusion in Friday’s statement. There was speculation on Thursday night that VAT and greater tax breaks for business investment could be part of the package. Mr Kwarteng will say: “Growth is not as high as it needs to be, which has made it difficult to pay for public services, requiring tax increases. “This cycle of stagnation has seen the tax burden forecast to reach its highest levels since the late 1940s. We are determined to break this cycle. We need a new approach for a new era focused on growth. “This way we will deliver higher wages, greater opportunities and sufficient revenue to fund our public services, now and in the future.”