![Jeremy Hunt backs inflation battle and says UK is financially stable](https://stripesandstarsnews.com/wp-content/uploads/2023/03/shutterstock_2268800531-300x217-LNu1vq.jpeg)
Jeremy Hunt backs inflation battle and says UK is financially stable
Chancellor Jeremy Hunt has backed the Bank of England to prioritise tackling inflation, despite concerns rapid increases in interest rates have contributed to recent volatility in the banking sector.
The Bank’s Monetary Policy Committee meets this week amid speculation it may pause its recent trajectory of raising rates when it announces its decision on Thursday.
Mr Hunt told the House of Lords Economic Affairs Committee that he discusses the issue “regularly” with Bank governor Andrew Bailey, and that reducing inflation remained the government’s focus.
“It’s [inflation] over 10% at the moment, that’s dangerously high, and we need to do everything we can to maintain our focus on bringing it down,” the chancellor said.
“So I only ever say to him, please do what you think is necessary, as indeed you are legally bound to do under the Bank of England Act.”
Moves by central banks to rapidly increase rates after more than a decade of historically low returns is cited as a significant factor in recent financial turbulence.
Silicon Valley Bank collapsed after the value of its medium-term fixed-income holdings plummeted, and the lack of confidence proved contagious, passing rapidly to Credit Suisse, which was bought by USB at the weekend in a Swiss-Government brokered deal.
The UK arm of SVB was bought by HSBC for £1 in a deal brokered by ministers and overseen by the Bank of England and the Prudential Regulation Authority.
Mr Hunt acknowledged that the path of interest rates “is the cause of volatility in financial markets”, but said he was reassured by UK and global plans to maintain financial stability, even in the event of a major bank collapse.
“We have a robust plan to deal with the globally significant banks that would cause a danger to our stability if they were allowed to fail,” he said.
“There are procedures in place and we haven’t yet had to test those procedures, even though one of those banks has been bought by another.”
Markets rebounding
Mr Hunt was speaking after markets rebounded from losses on Monday, with investors apparently reassured by comments from US treasury secretary Janet Yellen, who signalled depositors would be protected in the event of further collapses.
The S&P 500 was up 1% and the Dow Jones 0.9% in early trading, while in the UK the FTSE 100 was up more than 1.9%, driven by banks stocks.
NatWest rose 7%, Barclays 6%, and Standard Chartered and Lloyds were also trading higher.
Ms Yellen told the American Bankers Association that while “the situation is stabilising” she was ready to step in again to protect depositors in the event of further bank distress.
Silicon Valley Bank and Signature Bank both collapsed earlier this month, and First Republic Bank raised $30bn from its peers, led by JP Morgan, in an industry bailout following a rush of withdrawals.
Ms Yellen said: “Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Read more:
Jeremy Hunt backs inflation battle and says UK is financially stable