MPC man stokes rate rise fear

BANK of England monetary policy committee member Stephen Nickell fuelled City concerns of an imminent interest rates rise by warning today that he would like to see a rise in the cost of borrowing.

Nickell was one of the four members of the rate-setting committee who voted for a rate increase earlier this month but were defeated by a wafer-thin 5-4 vote.

He told the Glasgow Herald that recent buoyant retail sales, economic growth figures and robust housing market data had reinforced his view that interest rates must move up from their current 48-year low of 3.5%.

Nickell appeared to signal that he would again favour a quarter-point rise in rates at the next MPC meeting. ?My feeling is that we take one step at a time and that, if we take things slowly, we won't get some sort of sudden loss of confidence,‘ he said.

Nickell, one of four independents on the committee and traditionally labelled a dovish member of the MPC, said incremental rate increases were unlikely to destabilise domestic demand, but were required to keep inflationary pressures in check, especially among a tightening labour market.

He also said British consumers would be able to bear the increased costs of servicing debts. He said: ?The danger in the debt is basically whether people can service it. At the moment, I don't see that as a serious issue.

‘We on the committee are well aware of that. It is our job to control inflation, not to devastate the housing or any other market.‘