Economist puts case forward for 'softer' interest rate stance

19-Apr-2007

In what could be a bonus for first time buyers looking to get on the housing market, a leading economist has urged the Bank of England's monetary policy committee (MPC) not to be "too hawkish" when setting interest rates next month.

On the back of the recent revelation that inflation had risen above three per cent, many consumers - first time buyers among them - could have been left fearing an interest rate rise, something that could make getting on to the housing market more difficult.

However Fionnuala Earley, chief economist at Nationwide, has said that rates do not necessarily have to rise and has called instead for "economic stability".

"With inflation expected to return to target within a matter of months I'd caution against too hawkish a stance," she told BBC Radio 4's Today programme.

She continued by saying that an overly aggressive stance from the MPC could lead to "payment difficulties" and stability in the housing market being undermined.

The rise in inflation to 3.1 per cent prompted a letter from Bank of England governor Mervyn King to the chancellor in explanation of why the rate had climbed to more than one per cent above the target, a provision put in place when the bank gained independence in 1997.

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