King said “all central banks in the West” had failed in their duty to control inflation, and said they had fallen into a mindset of resorting to printing money whenever there was bad news.
“During COVID, when the economy was actually contracting because of lockdown, central banks decided it was a good time to print a lot of money,” he told the BBC. “That was a mistake. That led to inflation. We had too much money chasing too few goods. And the result was inflation. That was predictable. It was predicted, and it happened.”
“That was the wrong policy and all central banks – not just ours but the Federal Reserve, the European Central Bank – are all facing now very high inflation rates of close to 10 per cent. We’re all in the same boat.”
Soaring prices have delivered the sharpest squeeze on consumer spending power in decade, with Britain’s Consumer Prices Index rising 10.1 per cent last month from 9.9 per cent the month before. That matched a 40-year high reached in July and exceeded economists’ expectations for 10 per cent.
The figures leave inflation well above the Bank of England’s 2 per cent target, adding to pressure on policy makers to lift the key rate significantly next month.
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King warned whoever succeeded Liz Truss as British prime minister this week that there “isn’t enough money there among the rich to get it back” when it comes to meeting the “strong case” for extra spending in certain areas to help recover from the lockdown.
“The challenge is if we want European levels of welfare payments and public spending, you cannot finance that with American levels of tax rates. So, we may need to confront the need to have significantly higher taxes on the average person.”
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