Influential loan rates setter sees no crash ahead

Influential loan rates setter sees no crash ahead

The crisis in financial markets is unlikely to prompt a property crash or even bring the upward trend in house prices to an end, a member of the Bank of England's monetary policy committee said yesterday.

Kate Barker, one of the nine people who set interest rates each month, said it was "not immediately obvious" why recent developments should provide a "trigger which significantly alters expectations of continued robust house price growth".

Ms Barker said that even a "major weakening in the housing market" was unlikely to have a marked impact on consumer spending since it was not expected to be linked to higher unemployment or a deterioration in households' expectations of future incomes.

Ms Barker's views are likely to be seen as reducing the prospect of an early cut in interest rates, since she is a swing voter on the committee.

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She noted that households had so far shrugged off the impact of the credit crunch. "There was little deterioration in consumer confidence in September. Retail sales volumes have remained strong throughout the third quarter, although discounting meant that retail values grew only weakly."

Ms Barker said that in early August she had been doubtful whether the Bank's five interest rate increases since August 2006 would be enough to stifle inflationary pressures, but that the turmoil in markets had changed the balance of risks.

"The evidence from business surveys and housing market indicators will be an important part of my judgment over the next few months about how far the downside risks to the outlook have increased."

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