‘Still a long way to go’: UK finance minister warns inflation remains very high

LONDON – UK Finance Minister Jeremy Hunt indicated the country’s inflation remained very high, a day after the Bank of England agreed its 12th consecutive interest rate hike to combat persistently high home prices.

“I think we know there is still a long way to go. We still have inflation that is very high, growth is still not as high as we would like,” he told CNBC’s Martin Soong on Friday. said, hours later, the latest official data showed the UK economy grew by 0.1% in the first quarter,

“I think the UK is back and there are numbers that no one would have predicted even three months ago. These are very high growth projections,” he noted of the first quarter prints, yet labor supply, productivity Flagged the ongoing concerns on the rates. How to drive long term growth.

He defended that Britain’s economic performance had been hit by macro-economic concerns, “a once-in-a-century pandemic and an energy price shock that is the biggest since the 1970s.”

The COVID-19 pandemic has led to severe global logistics and production constraints, while sanctions following Russia’s full-scale invasion of Ukraine in February last year have cut off Moscow’s fuel supplies to Western consumers.

Hunt stressed his support of the Bank of England’s Thursday decision to raise interest rates by a further 25 basis points despite the latest GDP results, arguing that the measure would counter “fundamental volatility” resulting from higher inflation.

The continuing spring collapse of several international banks, including Europe’s Credit Suisse, had raised the question of whether central banks would begin to ease their policies of raising interest rates faster.

Hunt underlined, “I think we all believe, certainly we believe in the UK, that the most important thing we need to do is focus on getting inflation down.” “Once inflation comes down and you have stability, you can start to get growth.”

As of Thursday, the Bank of England’s monetary policy committee no longer expects the UK to enter recession this year, with Governor Andrew Bailey Defending that it is the “biggest upgrade” ever to forecasts Reflects an unstable economic scenario.

The central bank’s forecast marks an optimistic upgrade from the picture painted by the International Monetary Fund, which end of january It predicted the UK would be the only “advanced economy” to shrink in 2023, with its economic outlook worse than sanctions-hit Russia.

“I think a lot of people were expecting the UK economy to shrink, instead, it grew, only slightly, it grew in the quarter. I believed then and I believe now that the UK will be resilient this year.” Will be,” Hunt said Friday. “The big picture is what is encouraging for the UK”

High inflation has been compounded by large and little by little in recent months, with waves of workers in the transport, health and education sectors demanding wage increases to meet rising household spending.

Hunt said talks were underway to resolve the strikes, but downplayed wage increases as a cure-all solution.

“The one thing we will not do, as you say, is agree to pay rewards that fuel inflation, because then we will make the situation worse. It has been a difficult period.” ,” They said.

Questions remain over the extent to which British consumers have experienced the full extent of inflationary pressures, particularly in the housing sector. Hunt acknowledged that the UK mortgage model – in which buyers typically enter into three- to five-year fixed-rate payment plans – had partly shielded the economy from further injury and that house prices and mortgage rates were rising. has also stopped the decline.

“Fixed-rate mortgages cause delays in foreclosure times,” he said. “But there will be an impact because every month a certain number of people have to renew their fixed-rate mortgages, and so you get an impact on demand, as a result.”

In your April House Price IndexMortgage lender Halifax found British house prices rose just 0.1% year-on-year last month, up 1.6% in March and 10.9% in April 2022.