Bank rate 'not rising to calm housing market'

Bank rate 'not rising to calm housing market'

Wednesday, April 28, 2004

Interest rates should rise as the economy picks up, says Monetary Policy Committee member Marian Bell, but the Bank should not raise rates to cool down the booming housing market.

Ms Bell told the Financial Times in an interview published on its Web site that the amount of spare capacity in the economy was shrinking and inflation was rising. But she rejected the idea that the Bank should raise rates to calm the housing market.

"Investment seems to be picking up, consumption looks OK, the public sector is spending, the world economy is picking up,” the FT quoted Ms Bell. “The economy has been growing above trend, and probably still did in the first quarter, and if that's expected to continue, then inflation will be rising."

Only one member of the MPC voted against a rise earlier this month but analysts expect a rise in May. Although the tone of her words indicate a rise will be needed, Ms Bell refused to tell the Financial Times how she would vote when the committee meets next month.

Bell also told the newspaper the MPC was not trying to manage the housing market and said the change in the Bank's inflation target to the consumer price index measure, which excludes a component for house prices, has not made a difference to the MPC's decisions.

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