LONDON (AP) — Britain’s Treasury chief mentioned he could be ready to see the U.Ok. economic system slip again into recession if additional rate of interest hikes are essential to convey down inflation.

With the Bank of England anticipated to maintain elevating charges following higher-than-anticipated inflation figures this week, Jeremy Hunt mentioned it was essential to prioritize measures to sluggish the tempo of worth will increase.

In an interview with Sky News that aired Friday, Hunt mentioned the “only path to sustainable growth” is to convey inflation underneath management.

Asked if he was snug with additional charge hikes even when it may precipitate a recession, Hunt mentioned, “Yes, because in the end, inflation is a source of instability. … It is not a trade-off between tackling inflation and recession.”

Like different central banks, the Bank of England has been elevating rates of interest aggressively over the previous 18 months or so to a 15-year excessive of 4.5% after inflation spiked sharply, first due to bottlenecks attributable to the coronavirus pandemic after which Russia’s invasion of Ukraine, which brought on vitality and meals costs to surge.

Higher borrowing prices are aimed toward making it costlier for people and companies to borrow, which dampens demand within the economic system.

“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 mentioned.

There had been hope that the financial institution, whose main activity is to maintain inflation at round 2%, could pause charge hikes however the inflation figures this week raised alarm bells that it should go on tightening financial coverage.

The client costs index eased to eight.7% within the 12 months to April from 10.1% in March, largely as a result of final 12 months’s vitality spike within the wake of the invasion of Ukraine dropped out of the annual comparability.

The decline wasn’t as large as anticipated, particularly as costs within the wholesale fuel market have been falling for months.

Since then, monetary markets have priced in additional charge hikes from the central financial institution within the coming months, probably as much as 5.5%, unhealthy information for debtors and people trying to get a brand new mortgage.

“The shock print for inflation this week has very quickly reset most forecasters’ expectations of where the peak in the Bank of England rate will be,” mentioned Luke Hickmore, funding director at asset administration agency abrdn.

Earlier this week, the International Monetary Fund predicted that the British economic system would keep away from falling into recession this 12 months. However, its upgraded development forecasts had been launched earlier than the inflation figures, which led to the uptick in anticipated rates of interest.

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