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Jeremy Hunt backs Bank of England to raise interest rates to tackle inflation.
22:45, Fri, May 26, 2023 | UPDATED: 22:45, Fri, May 26, 2023
Jeremy Hunt makes a gamble (Image: Getty)
Jeremy Hunt admitted he is ready to risk recession if it brings down stubbornly high inflation.
The Chancellor said tackling the cost of living crisis is the “only path to sustainable growth”.
He backed interest rate hikes being used to calm inflation even if they cause the economy to contract in the short term.
Inflation has fallen into single digits for the first time since last July but stands at 8.7 percent.
The Bank of England has been rates as one measure to tackle inflation, but they could raise them even higher than the 4.5 percent they currently stand at.
Rishi Sunak pledged to halve inflation this year (Image: Getty)
Mr Hunt told Sky News he was comfortable with the Bank acting to bring down inflation even if it could cause a recession.
“Yes, because in the end inflation is a source of instability,” he said.
“If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.
“I have to do something else, which is to make sure the decisions that I take as Chancellor, very difficult decisions to balance the books so that the markets, the world, can see that Britain is a country that pays its way – all these things mean that monetary policy at the Bank of England (and) fiscal policy by the Chancellor are aligned.”
Prime Minister Rishi Sunak pledged to halve inflation this year.
Bank of England raises interest rates (Image: Getty)
The Bank’s governor Andrew Bailey said there is still a chance the Government will meet the pledge despite the challenges.
The International Monetary Fund has also upgraded its growth forecast for the UK, now expecting it to avoid a recession and grow slightly by 0.4 percent.
Mr Hunt said: “It is not a trade-off between tackling inflation and recession.
“In the end, the only path to sustainable growth is to bring down inflation.”
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