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MPC member looks on the bright side

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by Gill Montia

A member of the Bank of England’s Monetary Policy Committee (MPC) has spoken out against predictions of a property market slump, saying that the difficulties on the financial markets are unlikely to even bring UK house price growth to an end.

Kate Barker, one of the nine members of the MPC involved in setting the base rate, believes that it is “not immediately obvious” why recent developments in the markets should be a “trigger which significantly alters previous expectations of continued robust house price growth”.

Expanding her argument, Ms Barker explained that even a “major weakening in the housing market” was unlikely to have a marked impact on consumer spending, since it is not “expected to be linked to higher unemployment or a deterioration in households’ expectations of future incomes.”

Ms Barker is believed to favour a wait-and-see approach to interest rates and is regarded as an MPC swing voter.

However, she has revealed that in early August of this year she was doubtful whether the Bank’s five base rate increases since August 2006 would be enough to reduce inflationary pressures, but that the turmoil in markets has changed that veiw.

When the MPC meets to set the November base rate, Ms Barker will be reviewing “evidence from business surveys and housing market indicators” to inform her judgment over the change in the balance of risks in the UK economy.

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News posted: October 24, 2007

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