U.K.’s Sunak Signals Inflation Risk Worry as Prices Rise

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Chancellor of the Exchequer Rishi Sunak said rising prices are one of his near-term concerns, as U.K. inflation surged unexpectedly past the Bank of England’s target for the first time in almost two years.

“Of course that’s one of the many risks it’s my job to worry about,” Sunak said in an interview on GB News, when asked about the spike. “As interest rates and inflation change, that has an impact on our debt.”

The danger for Sunak is that a cycle of rising prices and interest rates could hamper his efforts to repair Britain’s battered public finances, where higher borrowing costs would further widen the country’s deficit of more than 300 billion pounds. Sunak said he still expects inflation to be anchored around 2% in the medium-term, which is the Bank of England’s target.

Earlier Wednesday, the Office for National Statistics reported that consumer prices rose 2.1% in May from a year earlier, above the 1.8% expected by economists and the BOE.

Pressed on how he might raise extra revenue to close Britain’s deficit, Sunak repeatedly declined to commit to maintaining the government’s “triple lock” policy on pensions, a guarantee to raise the state pension by the highest of three measures: annual growth in average earnings, inflation, or 2.5%.

Sunak said there would be a statutory review of the policy in the fall and that it remains the government’s position for now, though he wouldn’t comment on future spending decisions outside of fiscal events such as a budget or spending review.

“The triple lock is the government policy,” he said. “It’s right that we’re careful with people’s money.”

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