In a speech to Bloomberg Osborne says we must remain cautious and that inflation is proving more persistent than expected.
He adds: “I agree with Mervyn King when he said last week that we are likely to face a choppy recovery.
“To expect a smoother ride after the biggest economic crisis of our lifetimes, and with the debt problems this Government has inherited, would be asking too much.”
Osborne hit out at critics who say that by reducing the deficit so aggressively he is gambling with the economy.
He says to put off tackling the problems would wreck the British economy.