Jeremy Hunt's comments reflect the international community's concerns about the state of the UK economy under former Prime Minister Liz Truss. Credit: Samuel Corum/Bloomberg
Jeremy Hunt says «the UK is back» after international concern over the state of the economy under former Prime Minister Liz Truss.
Speaking to the BBC at the International Spring Meetings Monetary Fund (IMF) in Washington, the Chancellor shared comments he claims he received from his counterparts in other countries.
He said: «[Other] finance ministers tell me 'the UK is back'» and they are very happy because we always play a very big role in solving global problems.”
This followed a flurry of criticism at the last IMF meeting in October after Liz Truss's proposed tax cut caused a market panic that forced her to step down.
A separate lead economist, also speaking at the IMF summit, warned that bankers are losing credibility in the fight against inflation.
Mohamed El-Erian, chief economic adviser to Allianz, said institutions like the US Federal Reserve and the Bank of England failed to get prices under control quickly enough and are now damaging their reputation by refusing to admit the mistake.
Mr El-Erian warned that investors were already beginning to doubt the US Federal Reserve's ability to keep interest rates high.
He said: “I'm horrified that if central banks don't admit their mistakes and go public with this process, people will say you're not accountable enough and I'm not sure you should have the amount. political autonomy that you do.
“And operational autonomy is absolutely essential.”
He warned that most investors doubt the leadership of the Fed, that it will not cut interest rates at all in this year. . Traders are betting that rates will be a full percentage point below the current Fed forecast for the end of 2023.
He said: “I have never seen such a discrepancy between forward looking leadership and what the market is valuing. And I'm worried that this failure to be accountable will cause the markets to go their own way.» Referring to the collapse of Silicon Valley Bank and concerns about the financial industry, Mr. El-Erian added, «I think if the US had started [raising rates] earlier, we wouldn't have had such a concentrated increase in interest rates.»
"And we will not be in the midst of this trilemma, trying to simultaneously reduce inflation, minimize damage to growth, and maintain financial stability.”
This comes after a Bank of England politician warned that Threadneedle Street must be patient before raising interest rates again or risk burning the economy.
Speaking at the same panel, Silvana Tenreiro said, that the UK economy remains weak and consumption is still well below pre-Covid levels. trends.
Using economist Milton Friedman's famous analogy, Ms. Tenreiro said that history shows «long delays» between raising interest rates and the impact on the economy.
The bank raised rates in Up 11 times to 4.25% in the last 18 months.
She said: “We are still seeing much of this tightening work through the economy. And so at some point, we need to be patient.
"This is what we learned from Milton Friedman's metaphor for the Fool at Shower [who swirls hot water all the way to warm him up] . We don't want to get burned, we don't want an icy shower. So we need to be patient.”
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