Chancellor Jeremy Hunt has backed using interest rate hikes in an attempt to stop soaring inflation even if they increase the risk of a recession in the UK.

Mr Hunt insisted in an interview aired on Friday that the “only path to sustainable growth” is to bring down the high prices behind the cost-of-living crisis.

He told Sky News that prioritising measures to slow rising prices was necessary even if rate hikes damage the UK’s gross domestic product (GDP).

Asked if he was comfortable with the Bank acting to bring down inflation even if it could result in a recession, Mr Hunt said: “Yes, because in the end inflation is a source of instability.

Mr Hunt added: “It is not a trade-off between tackling inflation and recession.

“In the end, the only path to sustainable growth is to bring down inflation.”

So what is a recession and what affect could it have on the UK public?

What is a recession?

According to business magazine Forbes, a recession is "a significant decline in economic activity that lasts for months or even years.

Forbes added: "Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time."

What causes a recession?

There are, according to Forbes, six main causes of a recession:

  • A sudden economic shock
  • Excessive debt
  • Asset bubbles
  • Too much inflation
  • Too much deflation
  • Technological change

Bicester Advertiser: A recession is a significant decline in economic activity.A recession is a significant decline in economic activity. (Image: PA)

How does a recession affect me?

During a recession, you could lose your job, as unemployment levels rise and it becomes harder to find a new one since more people are out of work and people who keep their jobs may see cuts to pay and benefits.

Investments - in things like stocks, bonds and property - can lose money. 

Businesses are also affected, usually recording fewer sales during a recsion which increases the risk of bankruptcy.

Lenders tend to tighten standards for mortgages, car loans and other types of financing. 

Forbes added: "Even if you plan ahead to prepare for a recession, it can be a frightening experience."

Will there be a recession in the UK in 2023?

The Bank of England has been increasing interest rates as a way of tackling inflation, but they could be set to raise them even higher than the 4.5% they currently stand at.

Though down from 10.1%, the Consumer Prices Index of inflation remains stubbornly high at 8.7% while food remains alarmingly expensive.

Mr Hunt, speaking to Sky News, said: “If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.

“I have to do something else, which is to make sure the decisions that I take as Chancellor, very difficult decisions to balance the books so that the markets, the world, can see that Britain is a country that pays its way – all these things mean that monetary policy at the Bank of England (and) fiscal policy by the Chancellor are aligned.”

The International Monetary Fund in its growth forecast for the UK, is expecting it to avoid a recession, even predicting a slight 0.4% growth.