Jeremy Hunt believes that it will be necessary to push ahead with economic reforms in order to bring down inflation and avoid stubbornly high interest rates
Britain risks stubbornly high inflation and interest rates, ministers fear in the wake of a warning from the International Monetary Fund thatas the Government and Bank of England battle to bring inflation down, economists toldJeremy Hunt believes it will be necessary to ramp up efforts to reform the economy in response to “worrying signs” that prices are not coming down as quickly as hoped.
Pierre-Oliver Gourinchas, the IMF’s chief economist, warned the global economy is “quite fragile” thanks to the risk of bank collapses. He said: “We are… entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”
Mr Hunt said: “Thanks to the steps we have taken, the OBR says the UK will avoid recession, and our IMF growth forecasts have been upgraded by more than any other G7 country. The IMF now say we are on the right track for economic growth. By sticking to the plan, we will more than halve inflation this year, easing the pressure on everyone.”
Sir Charlie Bean, formerly the Bank of England’s deputy governor, added: “The UK is likely to see a more stubborn underlying inflation picture than maybe in either Europe or US. As far as the Bank is concerned, they won’t want to start lowering rates until they are clear inflation has been squeezed and all evidence is that underlying inflation still strong.” Mr Hunt’s economic reforms “are only going to bear fruit some way down the road”, he warned.
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