LONDON — Jeremy Hunt is prepared to accept a recession if interest rate rises help curb inflation, the U.K. chancellor has signaled.
In a Sky News interview Friday, Hunt insisted the “only path to sustainable growth” is to bring down the cost of essential goods.
Asked if he was comfortable with further interest rate rises even if they risk pushing the U.K. into a recession, Hunt said: “Yes, because in the end inflation is a source of instability.”
“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,” Hunt added.
Under U.K. monetary policy, the power to raise interest rates lies with the independent central bank. As part of its bid to tackle stubbornly high inflation, the bank has raised its key base rate to the highest level since the middle of the global financial crisis in 2008.
Despite recently falling below 10 percent for the first time in months, the consumer price index rate of inflation in the U.K. stands at 8.7 percent. Food prices in the U.K. are also continuing to surge at the fastest rate in nearly 45 years.
One of British PM Rishi Sunak’s key pledges is to halve the rate of inflation, which stood at 10.1 percent when he made the promise in January.
The opposition Labour Party hit back at Hunt’s suggestion recession may be the price to pay to bring down inflation.
“No government should ever be content to see recession,” Shadow Trade Secretary Nick Thomas-Symonds told Sky News. “Frankly, this government has no credible plan to restore growth.”