The minister of Finance British, jeremy huntstated that he supports the possibility that the United Kingdom dive into one recession if that is necessary for reduce inflation.
In an interview with Sky News television channel, the minister backed the Bank of England (BoE) in its fight against higher-than-expected prices and said he would support raising interest rates towards 5.5%.
“Yes, because in the end inflation is a source of instability. If we want to have prosperity, if we want to grow the economy, if we want to reduce the risk of recession, we have to support the Bank of England in the difficult decisions it makes,” he replied. the minister when asked if he was comfortable with the BoE doing whatever it took to reduce inflation, even if it might cause a recession.
Hunt explained that having inflation of 8% per year in the long term is not beneficial for people and considered it a source of instability.
To ensure economic prosperity and reduce the risk of recession, he said it is essential to support the Bank of England in the difficult decisions it makes.
These remarks came after market expectations for the UK interest rate spike were raised by inflation data, which turned out to be higher than expected this week.
Although a peak close to 4.75% was anticipated, last Wednesday’s statistics led to the projection of a peak of 5.5%, being the biggest change in interest rate expectations since 2008.
The Bank of England also recognized that it has a lot to learn about how monetary policy works in a world of major shocks.
Bank Governor Andrew Bailey also said the job market is loosening, while Bank Chief Economist Huw Pill lamented the need to urge people to accept that they are poorer because of inflation.
For his part, Prime Minister Rishi Sunak has vowed to halve inflation this year, targeting just over 5% by the end of 2023.
In that sense during the interview, Hunt commented that when the prime minister announced that his objective was to halve inflation in January, there were some people who made fun of that and said: “Well, it’s automatic, it’s going to come down from all modes”.
“There is nothing automatic about reducing inflation, it is a big task, but we must and will do it. It is not a trade-off between tackling inflation and recession. In the end, the only path to sustainable growth is to reduce inflation,” added the minister.
According to the forecasts of the Bank of England, it is possible to achieve that objective, however, the president of Queens’ College, Cambridge, and the main economic adviser to Allianz, Mohamed A. El-Erian, argued in statements to The Guardian newspaper that the BoE has no choice but to keep raising interest rates to combat inflation.
El-Erian maintains that the risk of stagflation is minimal because inflation in April was lower than expected, standing at 8.7% annually.