In response to a question about further interest rate tightening by the UK Central Bank after the release of figures that showed inflation slowing less than expected in April, Hunt pointed out that “inflation is finally a source of instability, and if we want (. ..) to achieve growth and reduce deflationary risks, we must support the Bank of England.”
The finance minister was keen to show his agreement with the monetary authorities after the panic which raged in the financial markets under the reign of Prime Minister Liz Terrace, who criticized the policies of the Bank of England and revealed a huge unfunded budget.
Hunt also spoke of the “difficult decisions” he would make as chancellor to “balance the public accounts so that financial markets see Britain as a paymaster”.
And this toughening message came at a time when interest rates on long-term loans in Britain rose to touch the peak they had reached during the crisis in the era of Truss, after the publication latest inflation figures, which stood at 8.7% in April, the highest rate among the G-7 countries.
Investors expect interest rates to continue to rise this year and could reach 5.5% at the end of 2023, compared to 4.5% currently.
And higher borrowing rates in the markets, which coincided with the Bank of England tightening key interest rates, led to higher borrowing costs, particularly in the area of real estate, for UK individuals and businesses.
But the UK economy has so far avoided deflation, giving the Bank of England room to manoeuvre.
And the International Monetary Fund announced this week that it now expects UK growth of 0.4% for the whole of 2023, while pointing to a contraction in its previous forecast.
Hunt, on the other hand, did not confirm press reports that Indian group Tata Motors, owner of Jaguar Land Rover, is preparing to choose Britain to build a huge electric battery factory thanks to a possible subsidy from London.
But he stressed that the conservative government of Rishi Sunak “will always do what is necessary to keep the country competitive”.
“We have a £1billion car conversion fund. There are other countries that support companies that make investments. And of course it’s good to create those jobs for Britain and also to move towards carbon neutrality,” he said.
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Source : https://www.easternherald.com/2023/05/27/hunt-britains-priority-is-to-fight-inflation-even-in-the-face-of-deflation/