“I think we are aware that there is still a long way to go. We still have too high inflation and growth is still not as high as we would like it to be,” he told CNBC hours after the latest official data showed Britain’s economy grew 0.1% in the first quarter of 2023.” I think the UK is slowly recovering and these are numbers that no one would have predicted even three months ago. These are much higher growth forecasts,” he said, yet reiterated lingering concerns about labor supply, productivity rates and the ability to increase long-term growth.
Hunt stressed that Britain’s economic performance had been affected by macroeconomic concerns, “a once-in-a-century pandemic and a spike in energy prices which is probably the biggest since the 1970s”. The corona epidemic led to logistical bottlenecks and a severe crisis in global production, while at the same time the sanctions following Russia’s invasion of Ukraine in February last year created the energy crisis when Moscow cut off its fuel supply to the continent.
Hunt made it clear that he supports the Bank of England’s decision yesterday to raise interest rates again by 0.25% despite the latest GDP results, arguing that the move will prevent the destabilization that could occur as a result of high inflation. The collapse of several international banks, including European Credit Suisse, cast doubt If the central banks start easing their policy of rapid interest rate hikes. “I think we all believe, certainly we in the UK believe, that the most important thing we need to do is focus on getting inflation down,” Hunt stressed. “Once inflation is down and you have stability, you can start raising the growth”.
The central bank’s forecast signals optimism from the picture painted by the International Monetary Fund, which at the end of January predicted that Britain would be the only “advanced economy” to contract in 2023, with an economic outlook worse than that of Russia, which is facing sanctions. “I think a lot of people expected the UK economy to contract, and instead it grew, albeit slightly, during the quarter. I believed then and I believe now that the UK will be resilient this year,” Hunt said. “The bigger picture is an encouraging picture for Britain,” he concluded.
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The real interest rate is negative -1% -5% – inflation will rise (L.T.)