Cameron warns of inflation threat

BRITISH PRIME minister David Cameron has warned that rising inflation poses a threat to Britain amid warnings from economists…

BRITISH PRIME minister David Cameron has warned that rising inflation poses a threat to Britain amid warnings from economists that the Bank of England has failed to tackle the worrying trend.

The prime minister insisted he did not want the country to go back to the days when inflation was a persistent problem.

Recent inflation figures – caused partly by a surge in food and commodity prices – were “concerning”, he told the BBC, because they were “well outside what the Bank of England is meant to deliver”.

The comments may appear to be a rebuke to Mervyn King, governor of the bank, although the prime minister went on to say that he had faith in the “excellent” Mr King. The bank’s independent monetary policy committee had largely done a good job, he added.

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But several independent economists have accelerated their predictions for the next rise in interest rates.

Alan Clarke, economist at BNP Paribas, said that monetary policy setters had “lost credibility”.

Inflation was slightly above the bank’s 2 per cent target throughout last year, and is forecast to hit 4 per cent this year after last week’s rise in VAT. – (Copyright The Financial Times Limited 2011)