Rishi Sunak can fight recession risks with a cost of living support package | Larry Elliott

Rishi Sunak can fight recession risks with a cost of living support package | Larry Elliott

Less than three months after Russian troops moved across the border into Ukraine the economic implications of the war are gradually sinking in. There have been other conflicts since 1945 but it is hard to think of one that has had such a dramatic and sudden impact. The only real comparison is with the Yom Kippur war of 1973.

Support for Ukraine has been widespread in the west, among governments and the public, but only now are the consequences of sanctions and embargos starting to be felt. This week the US Federal Reserve and the Bank of England raised interest rates in the face of annual inflation rates heading towards 10%. The European Central Bank will follow suit in the months to come.

The threat of recession is obvious. Central banks say they are powerless to prevent rising global energy prices from pushing up the cost of living but think they can prevent high inflation becoming embedded. The former chancellor of the exchequer Norman Lamont once said higher unemployment was a “price worth paying” to get inflation under control, and that sentiment lives on.