An adviser to the Chancellor known as on the Bank of England to create a recession to convey down inflation.

Economist Karen Ward warned there are indicators the UK is falling right into a price-wage spiral that's fuelling the price of residing disaster.

The JP Morgan strategist, who sits on the Chancellor’s financial system advisory council, stated that with out weak point within the financial system, inflation would possibly stick round for for much longer.

She stated: “The difficulty for the Bank of England – I mean, no-one envies them their job at the moment – is they have to therefore create a recession,” she stated.

“They should create uncertainty and frailty, as a result of it’s solely when firms really feel nervous concerning the future that they'll assume ‘Well, maybe I won’t put by way of that value rise’, or staff, after they’re a bit bit much less assured about their job, assume ‘Oh, I won’t push my boss for that increased pay’."

“It’s that weakness in activity which eventually gets rid of inflation.”

Last month Mr Hunt said he was comfortable with a recession to bring down rising prices ”because in the end, inflation is a source of instability”.

Some economists have predicted the Bank will hike up interest rates today by 0.5 percent after inflation remained stuck at 8.7 percent.

Rob Morgan, chief investment analyst at Charles Stanley, said: “An increase to 4.75 percent is all but nailed on, but a shock-and-awe rise of 0.5 percent to five percent cannot be ruled out."

“The Bank of England will possible preserve tight coverage for the rest of the yr, that means additional rate of interest rises and no vital charge cuts till 2024.”

The rate of interest the Government pays on two-year gilts – basically IOUs issued by the Treasury – to a recent 15-year excessive of practically 5.09 p.c.