The former governor of the Bank of England said record high inflation was caused by the Bank of England keeping interest rates too low for too long.
Lord Mervyn King said inflation was now contained but criticized all central banks for not acting quickly enough initially.
Interviewed by BBC Radio 4 Ahead of next month’s Budget, he also said there would “definitely be some changes” to the fiscal rules.
He criticized the previous government’s cuts to national insurance and said Labor should reverse that approach.
Asked whether the Bank of England had kept interest rates “too low for too long”, Lord King said: “Yes, that’s why we have inflation.”
“But they raised interest rates like all other central banks – not just the Bank of England – and inflation is now back under control,” he added.
The crossbench added that interest rates were now “in the right range”.
in its At its most recent meeting in September, the central bank chose to keep its benchmark interest rate unchanged. – Determines interest rates on mortgages, credit cards and savings – is 5%.
The next meeting will be held in November.
Turning to the budget, Lord King predicted there would be “some compromise” as the government commits to both public sector investment and spending restraint.
Therefore, he expects the government may choose to adjust these restrictions.
“There will definitely be some changes to the fiscal rules,” he said.
“The national debt to national income ratio is the right indicator to judge whether we are on a sustainable path, but judging it by reference to a forecast five years ahead (a rolling five-year horizon) doesn’t mean anything.
“The right thing to do is to commit to reducing the debt-to-national-income ratio by the end of this parliament, which is a fixed date.”
Lord King also criticized Labor for promising Tory cuts to national insurance.
“I don’t understand why the previous government cut National Insurance contributions,” he said.
“I think it’s irresponsible and I think it’s equally irresponsible for the opposition then, and now the government, to commit themselves not to reverse this.”
