Inflation not a problem, says Cable

Vince Cable says there is no underlying inflation problem in Britain despite the CPI measure hitting 4.5 per cent last month
12 April 2012

There is no "underlying inflation problem" in Britain despite the CPI measure hitting 4.5% last month, Business Secretary Vince Cable has said.

Mr Cable signalled backing for the Bank of England keeping interest rates on hold amid sharp price hikes, describing its approach as "reassuring".

He also warned that people had not yet grasped the seriousness of the credit crunch, and there was the potential for another disaster.

The comments, in an interview with the New Statesman, risk infuriating savers who have seen the value of their money dwindle over the past 16 months when inflation has been above the 2% target.

By convention, politicians avoid giving their views on interest rates as they are controlled independently by the Bank. But the Liberal Democrat Cabinet minister suggested that the level should remain at the record low of 0.5%.

"We don't have an underlying inflation problem," Mr Cable said. "The Bank's job, as the governor (Mervyn King) keeps pointing out, is not to look at today's numbers, but to look 18 months ahead. It still seems that the centre of gravity at the Monetary Policy Committee is very much at the governor. I find that reassuring."

Mr Cable went on: "I think the thing that worries me more than anything else (is that) we really haven't engaged with the real depths and seriousness of the financial crash.

"I was very impressed with that Warren Buffet metaphor that asset-backed mortgage lending was the atomic bomb, and that there are hydrogen bombs out there. I just don't think that collectively governments have got to grips with this at all."

Asked whether another financial "bomb" could go off, he replied: "It's not imminent. But you can see this happening."

On Tuesday, the business secretary was forced to backtrack after saying he believed Greece would have to reschedule its debts, with aides stressing he was only voicing a "personal" opinion rather than stating government policy.

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