House price growth surprising, says MPC member |
|
|
Published
:
Tue, 19 Sep 2006 11:25
|
LONDON - Kate Barker, a member of the rate-setting Monetary Policy Committee admitted that the jump in house prices in recent months had surprised the Bank of England. Her comments underline the feeling of many analysts that the house price boom may be short lived.
"I have to say that’s a surprise. In the very long run, it is difficult to think of house price growth being perpetually above earnings, unless there’s something else going on, like a constraint on supply," Barker said in an interview on The Daily Telegraph. "However, it doesn’t seem to me that it’s unsustainable over the forecast horizon [of around two years]. I think it would go on being true that people should think carefully when they buy a home." The interview is published on www.telegraph.co.uk/business.
She also added that in view of the fluctuating inflation, the MPC was prepared to take an aggressive stance on raising the interest rates once again. Ms Barker said that in their opinion house price inflation was being driven by concerns that employers might have to increase wages this winter. "If you look back on our remit, we have got this ability to bring inflation back more slowly if we want to," she said. "And if we were having a period of very slow growth, the argument that it’s desirable to bring it back slowly would carry more weight with me."
Ms Barker's comments also touched on the issue of another rate rise. Many analysts anticipate that the BoE will raise the rates to 5 percent in the last quarter, maybe in November. Barker said growth concerns were unfounded since growth was above the average. "So the risk that inflation in the autumn would have a more significant effect on wage setting was what lay behind the August rate rise," she observed.
|
|
|
|
|
|
Print this Story
Halifax cautions about annual rate of house price inflation 