Bookmakers slashed the odds of a May general election after growing speculation the Prime Minister is considering a snap poll.
Downing Street insiders pointed out the Prime Minister has “repeatedly” said his “working assumption” is the vote will be held in the second half of the year.
But they declined to categorically dismiss a snap poll being called to coincide spring local elections.
A No 10 source said: “I will never rule in or out anything on a general election.”
Mr Sunak held private talks with Sir Graham Brady, the powerful chairman of the 1922 Committee of Conservative backbenches, on Monday night.
The meeting was described as routine by No 10 but it sparked fresh discussions among MPs that the Prime Minister could go early after a difficult few weeks.
Bookmaker Coral said it has slashed the odds for a May election from 5-1 to 3-1 after a flurry of bets.
A core group of Tories want the Prime Minister to call the election soon amid fears poor polling will get worse.
But many fear that the party is not ready to go to voters yet and want time for tax cuts worth around £900 for an average worker to kick in.
Mr Sunak would have to call the election next week if he wants it to coincide with council and mayoral elections on May 2.
Under electoral law, Parliament has to be dissolved 25 working days before a general election is held.
That means no later than March 26, but parliament needs at least a few days’ notice to allow any remaining non-controversial pieces of legislation to be approved.
Mr Sunak is expecting his Rwanda deportation bill to clear its final parliamentary stages early next week.
More than 2,500 council seats are up for grabs across 107 local authorities in England on May 2.
Some of the most high-profile politicians in the country are also seeking another term as mayor, including Labour’s Sadiq Khan in London and the Conservatives’ Andy Street in the West Midlands.
Voters in Wales will also go to the polls on May 2 to choose new police commissioners.
It is not unprecedented for a general election to take place on the same day as local elections – it happened most recently in May 2015.
The latest possible date, by law, for the dissolution of the current Parliament is December 17 2024 – exactly five years since Parliament first met, on December 17 2019.
It would mean polling day would have to take place by late January.
