Jeremy Hunt has urged cash-strapped Britons to be “patient” with “painful” interest rate rises as has stressed that hikes were “one of the most effective methods” of squashing stubborn inflation.
The chancellor said the government was “absolutely committed” to supporting the Bank of England taking the “necessary steps” to curb inflation.
It comes as the central bank this week issued its 13th interest rate hike in a row, this time by half a percentage point from 4.5 per cent to 5 per cent in the sharpest increase since February.
Surprising economists who had been expecting a smaller hike of 0.25 percentage points, the move brought rates to the highest level in nearly 15 years.
The move was an attempt to reduce inflation, which measures the rate of rising prices, which remained at 8.7% in May despite efforts to tame it.
It left mortgage holders bracing for a big jump in their monthly repayments.
Writing in the Mail on Sunday, Mr Hunt said: “Despite how painful it is for many across Europe right now, one of the most effective methods of bringing inflation down is by increasing interest rates.
“It is working in other countries, and it will work here too. But we must be patient; things will get better.”
The Treasury chief warned that “if we don’t act now, it will be worse later”.
He said other countries are facing the same issues, “so ignore the predictable calls from those blaming Brexit”.
Experts have said the extra red tape created by Brexit has contributed to a rise in food prices in the UK.
Mr Hunt pointed to measures he agreed with banks aimed at cooling the mortgage crisis, including allowing borrowers to extend the term of their mortgages or move to an interest-only plan temporarily.
They include allowing homeowners to move to interest-only mortgage holidays and apply for a 12-month repossession grace period if they can’t pay their bills, without affecting their credit scores.
But the support was dismissed as “weak” and a “sticking plaster for a gushing wound” by Labour and the Lib Dems, while mortgage brokers described the measures as “water pistol to put out a fire”.
The chancellor concluded: “As the Bank of England takes the necessary steps to see us through this difficult time, we must hold our nerve. And as the prime minister said last week, we are going to get through this.”
