Greenspan Warns Of Problems For UK Economy

Alan Greenspan, former Chairman of the Federal Reserve, has today spoken out against the UK housing boom, predicting significant unrest over the coming years as a result of the US sub-prime sector.

In a statement made today, Greenspan said that UK inflation would more regularly break the 3% mark resulting in a need for higher interest rates over the long term, as well as suggesting that the current boom in the housing market will soon come to an abrupt end.

Several months ago, Mervyn King, Governor and Chairman of the Bank of England’s Monetary Policy Committee, had to account to the Treasury for the increase in inflation beyond official targets, which Greenspan said would inevitably become a more frequent occurrence as the spillage from the US sub-prime market begins to take its toll this side of the pond.

Greenspan also highlighted the vast number of variable-rate mortgage holders could make the UK lending markets vulnerable to further rate rises as necessary from upwards inflationary pressure in future, which could even see a repeat of similar problems as are currently being experienced in the sub-prime sector.

The news comes on the eve of the Federal Reserve’s expected interest rate cut, which it is predicted will stabilise lending markets and help calm investor jitters on international stock exchanges. Expectations are that rates will fall two steps in order to give markets a much needed boost.

The extent of the sub-prime crisis has seen it spread around Europe and Asia as well as throughout the US, which has effectively created a worldwide problem.

The former Chairman of the Federal Reserve has suggested that the impact of that situation will continue to cause problems for the world economy as an entity and for each individual state economy as it becomes affected.

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