British Prime Minister Rishi Sunak on Thursday struck a note of reassurance as the Bank of England raised the country’s interest rate to hit a 15-year high of 5 per cent, and said he remains committed to his government’s target of halving inflation.
Addressing a PM Connect event at Dartford in Kent, the British Indian leader reiterated that curbing inflation was not going to be easy but he remains determined to stay the course even as rising interest rates pile pressure on mortgage holders.
Pointing out that the economic pressures being faced by the UK are part of a wider global trend as a result of conflict and high energy costs, Sunak said he believes the UK will get through this tough phase.
“I’m here to tell you that I am totally, 100 per cent on it,” said Sunak.
“And it is going to be OK and we are going to get through this and that is the most important thing I wanted to let you know today,” he said.
Taking questions from a gathering of local workers and reporters, the Prime Minister also hit out at the Opposition Labour Party’s borrowing plans, which he said would “make the situation worse”.
“If I just gave into the easy thing every time, that would just mean more and more government borrowing, that just puts fuel on the fire of inflation and makes it worse, makes it last longer, means interest rates would go up even more. And that’s not going to do anyone any favours,” he said.
Asked about tax cuts under his leadership, he added: "The biggest tax cut that this government could deliver for you and for everyone else is to halve inflation. That is a massive tax cut because it is inflation right now that is making everyone poor." His reassurances followed the Bank of England’s Monetary Policy Committee (MPC) deciding in favour of a major half a percentage point hike to the country’s interest rates to hit 5 per cent – the highest level since 2008.
It came after the UK's official inflation rate stayed stubbornly stuck at 8.7 per cent in May, well above the bank's 2 per cent target.
"The current levels, I'll be honest, are unsustainable," said Bank of England Governor Andrew Bailey, with reference to wage rises which are feeding inflation.
An Indian-origin economist on the independent MPC which votes on interest rate hikes, Swati Dhingra, was one of two members who voted in favour of holding the rate at 4.5 per cent.
However, the majority voted for a hike and the Bank of England reiterated that if there were to be evidence of more persistent pressures on inflation, then further tightening in monetary policy would be required.
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