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<p>The Chancellor has regular discussions on macroeconomic policy with European and
G7 counterparts. They all recognise the significant challenges ahead of us in the
months to come. The G7 has an important role to play in steering the global economy,
and as Chair of the G7 Finance Track, the Chancellor has discussed with colleagues
how best to shape and respond to the phases of the global recovery from Covid-19.
This includes the short- and medium-term economic challenges relating to both fiscal
and monetary policy. The Chancellor will continue to work with colleagues over the
coming months to learn from each other’s policy interventions, to recognise and manage
spillover effects, and to support continued coordination on policy responses.</p><p>
</p><p>As highlighted in the Budget, while borrowing costs are affordable now, interest
rates and inflation may not stay low forever. A sustained 1 percentage point increase
in both interest rates and inflation would increase debt interest spending by £27.8bn
in 2025-26.</p><p> </p><p>It is important to take action as the economy durably recovers
to limit the UK’s exposure to this risk and to build fiscal resilience. The Office
for Budget Responsibility’s March 2021 forecast shows that the medium-term outlook
for the public finances has returned to a more sustainable path, supported by the
fiscal repair measures set out in the recent Budget.</p><p> </p><p>Treasury Ministers
have regular discussions with counterparts in the devolved administrations on matters
of mutual interest.</p>
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