Bank chief denies U-turn over interest rates

Last updated at 16:24 24 June 2004

Bank of England Governor Mervyn King has dismissed claims today that the monetary policy committee had jettisoned its gradual approach to interest rates.

He told the Treasury Select Committee that two consecutive hikes in the cost of borrowing to 4.5% should not be interpreted as a U-turn in strategy.

But Mr King admitted that inflationary pressures such as the boom in house prices meant the case for caution was now "less compelling".

Appearing with other members of the MPC, Mr King warned homeowners not to expect the value of their property to rise forever.

House prices have risen by more than 20% over the past year but Mr King said: "The chances that there may be falls... are greater than they were."

His comments came as a survey of economists for BBC Radio 4's Today programme found that 40% believe house prices in the UK will fall over the next three years.

And just 15% thought prices would continue to rise at the above-inflation rates seen in recent years.

No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards.

We are no longer accepting comments on this article.

Who is this week's top commenter? Find out now