THE UK has ‘no alternative’ but to hike interest rates in a bid to make borrowing much more expensive to try to slow down rising prices, Chancellor Jeremy Hunt has said, adding that the rate at which prices rise was the ‘number one challenge we face’.
He said the government would be ‘unstinting in our support’ for the Bank of England ‘to do what it takes’ to slow inflation. The Bank’s Tory solution is to starve the working class and further slash wages!
In fact rising interest rates and mortgage costs put an end to any UK economic growth in April.
Borrowing costs have been steadily rising since December 2021 to a current 4.5% in an attempt to slow consumer price inflation, which the bank says stands currently at 8.7%.
This is more than four times the Bank of England’s 2% inflation target.
Asked if he was following former Chancellor John Major’s dictum in 1989 that, ‘if it isn’t hurting, it isn’t working’, Chancellor Hunt responded: ‘In the end there is no alternative to bringing down inflation, if we want to see consumers spending, if we want to see businesses investing, if we want to see long-term growth and prosperity.
‘We have to do everything we can as a government, as a country, to support the Bank of England in their mission to squeeze inflation out of the system.’
The UK economy expanded in April after shrinking by 0.3% in the previous month. For the three months to April, the UK economy grew marginally by 0.1%.
The ONS said strong trade in bars and pubs boosted growth. But it added that the construction sector had faltered, as rising interest rates and mortgage costs made house buyers more cautious. One housebuilder told the BBC, people were ‘holding back’ on buying homes.
As interest rates have risen and more people are coming to the end of fixed-rate mortgage deals, some lenders have been withdrawing certain mortgages from the market.
Already first-time buyers are being met with higher rates, leaving some priced out, and renters are also facing higher costs, and evictions due to landlords selling up.
The Bank of England is widely expected to lift interest rates again when its Monetary Policy Committee meets next week.
But stronger than expected wage growth, due to the determination of workers in the trade unions to defend the living standards of their members to match price rises, has raised the prospect that interest rates could rise close to 6% by the end of the year.
Yael Selfin, chief economist at accountancy firm KPMG UK, said ‘major challenges’ remained for the UK economy.
She added it was likely the Bank of England would continue its rate hiking cycle ‘putting further pressure on both households and businesses as they face higher borrowing costs’.
Labour’s Shadow Chancellor Rachel Reeves said the figures represented ‘another day in the dismal low growth record book of this Conservative government’.
‘The facts remain that families are feeling worse off, facing a soaring Tory mortgage penalty and we’re lagging behind on the global stage.’
Bank of England governor Andrew Bailey said yesterday that he is poised to launch a review into what went wrong during the pandemic and its aftermath to cause Britain’s deepening inflation crisis.
Bailey told a committee in the House of Lords ‘I do think that we gave moved into an era where we have had very big supply shocks operating on the economy and inflation.’
Bailey added that the Monetary Policy Committee is expected to raise interest rates to 4.75% next week and analysts believe ‘sustained pressures’ on the economy will push policy makers to go further with rate rises in the month ahead.
In fact food price inflation is going to rocket upwards. The reason for it is that the UK, the US and other states are financing the Ukraine war against Russia and that this is what has has driven food prices sky-high world wide.
The Ukraine has already warned the West that another world-wide food price explosion is on the way as the Ukrainian ‘offensive’ hits the grain harvest. This is the grain that feeds the masses of Europe and Asia.
The way to defeat the threat of a massive further food price inflation is for the UK workers to bring down the Tories with a general strike to bring in a workers government, that will nationalise the banks and the major industries, stop arms supplies to the Ukraine, and bring an end to the imperialist intervention against Russia.