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| Greenspan sees end to house boom | |
| (21 minutes later) | |
| Alan Greenspan has said the turmoil in credit markets was an "accident waiting to happen", and has also warned of much higher UK inflation in future years. | |
| Inflation would rise above 3% on a regular basis, putting pressure on interest rates, and the UK housing boom would soon come to an end, he said. | |
| He said it was too early to say if the current financial crisis would be more damaging than that seen in 1998. | |
| "This has not fully played out," he told the Daily Telegraph. | "This has not fully played out," he told the Daily Telegraph. |
| Inflationary pressures | Inflationary pressures |
| Bank governor Mervyn King was forced to write a letter to the Treasury earlier this year explaining why inflation had risen above 3%, well above the government's 2% target. | Bank governor Mervyn King was forced to write a letter to the Treasury earlier this year explaining why inflation had risen above 3%, well above the government's 2% target. |
| Mr Greenspan said this would become a more regular occurrence as the Bank had to deal with the prospect of higher inflation and higher interest rates. | Mr Greenspan said this would become a more regular occurrence as the Bank had to deal with the prospect of higher inflation and higher interest rates. |
| There's going to be more correspondence between the Chancellor and Mervyn King Alan Greenspan | There's going to be more correspondence between the Chancellor and Mervyn King Alan Greenspan |
| "There's going to be more correspondence between the Chancellor and Mervyn King," he said. "Markets are going to start turning round and inflationary pressures are going to start to build." | "There's going to be more correspondence between the Chancellor and Mervyn King," he said. "Markets are going to start turning round and inflationary pressures are going to start to build." |
| On house prices, Mr Greenspan said the UK market was vulnerable because of the large number of variable-rate mortgage holders. | On house prices, Mr Greenspan said the UK market was vulnerable because of the large number of variable-rate mortgage holders. |
| "The housing thing has not turned yet and the consumer households are more subject to interest rate changes than in the US. | "The housing thing has not turned yet and the consumer households are more subject to interest rate changes than in the US. |
| "It is going to turn. It has got to turn because it is not projectable." | "It is going to turn. It has got to turn because it is not projectable." |
| Pressure is building on Mr Greenspan's successor, Ben Bernanke, ahead of the Fed's crucial decision on interest rates on Tuesday. | Pressure is building on Mr Greenspan's successor, Ben Bernanke, ahead of the Fed's crucial decision on interest rates on Tuesday. |
| 'Weak link' | 'Weak link' |
| Most experts believe the Fed will cut rates in an effort to restore confidence to the financial markets as the scale of the current crisis in the sub-prime mortgage market unfolds. | Most experts believe the Fed will cut rates in an effort to restore confidence to the financial markets as the scale of the current crisis in the sub-prime mortgage market unfolds. |
| "Sub-prime in the US was the weak link in our system," Mr Greenspan added. | "Sub-prime in the US was the weak link in our system," Mr Greenspan added. |
| "There was an accident waiting to happen. If it wasn't sub-prime, it would have been something else." | "There was an accident waiting to happen. If it wasn't sub-prime, it would have been something else." |
| Mr Greenspan reiterated previous remarks that a recession in the US was a possibility while adding that the economy was currently "holding up". | Mr Greenspan reiterated previous remarks that a recession in the US was a possibility while adding that the economy was currently "holding up". |
| "It is possible the stability in the underlying economy in the US and the world at large is such that ultimately this financial crisis defuses like a hurricane which hits land and all of a sudden runs into the mountains." | "It is possible the stability in the underlying economy in the US and the world at large is such that ultimately this financial crisis defuses like a hurricane which hits land and all of a sudden runs into the mountains." |