George soothes house price fears

By This Is Money
Updated: 19:00 EDT, 20 January 2003

BANK of England Governor Sir Edward George on Monday said he thought a collapse of consumer spending and house prices was unlikely. 'Some real gloomsters still talk of the possibility of a double dip back into recession,' he told bankers in Glasgow in a speech designed to calm nerves.

'Domestically the gloomsters talk of the risk of a sudden sharp fall in the rate of growth in consumer spending - often related to a 'crash' in house prices.' But he said these scenarios were neither 'necessary' for rebalancing the economy nor the 'most likely' outcome.

George added that interest rates were unlikely to rise if consumption showed signs of slowing. He indicated that the Bank's monetary policy committee's stance was neutral at present, saying that it stands ready to move rates 'in either direction'.

The Governor and his MPC colleagues have said recently that they expect consumption and debt levels to ease as other sectors such as exports fuel growth.

George praised the big increase in public spending from Chancellor of the Exchequer Gordon Brown, saying that consumers would have been left on their own to drive economic growth at a time when other sectors had faltered. He also predicted that a recovery in the US and European economies would help British exports.