LONDON, March 11 (Reuters) – British finance minister Rachel Reeves said on Wednesday it was too soon to judge the impact of the conflict in the Middle East on the UK economy but she would do what is possible to soften the hit to consumers.
“At this stage I think it would be unwise to speculate on what the impact on inflation, growth or interest rates would be,” Reeves told lawmakers.
“But of course we are looking at a number of scenarios and monitoring very carefully this situation,” she said.
Reeves has previously said inflation is likely to rise as a result of the rise in global energy prices caused by the U.S.-Israeli war with Iran.
An official with Britain’s fiscal forecasters said on Tuesday the country’s inflation rate could end the year at around 3% rather than 2% as assumed by the Office for Budget Responsibility if energy prices stayed at current levels.
Asked whether Britain could fund big cost-of-living support measures, as it did in after Russia’s full-scale invasion of Ukraine in 2022, Reeves said the government would “always make sure that we do everything we can to protect consumers but also to ensure our national security as an economy.”
Prime Minister Keir Starmer has said he wants to speed up an increase in defence spending.
“We are in a stronger position than when I became chancellor to respond to shocks like these, and we are in a stronger position in many ways than when Russia illegally invaded Ukraine,” Reeves told parliament’s Treasury Committee.
She added that it was now more practical to offer targeted support to consumers than it was four years ago.
British government bonds have fallen sharply since the start of the conflict in the Middle East, in part due to concerns among investors about the risk of higher borrowing by the government to shield households and businesses from higher energy bills.
(Reporting by David Milliken and Andy Bruce Writing by William Schomberg)
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