The governor of the Bank of England has denied that rising interest rates are damaging growth and employment in Scotland.

In a speech to businesspeople in Glasgow, Eddie George stressed that if there were new signs of inflation, then interest rates would go up again.

Mr George, who is in Scotland to preside over a meeting of the bank's "court" or board for the first time in its 305-year history, is using his visit to meet business groups and unions.

It had been expected that he would get a hostile reception from Scottish industry leaders who believe increasing interest rates are bad for business.

The Bank of England's Monetary Policy Committee raised rates last week by 0.25% amid fears of inflationary pressure in the economy.

Commenting on that subject, Mr George said: "The MPC sets interest rates to achieve the government's target for retail price inflation in the UK economy as a whole. Those are our marching orders.

"For the past seven years the UK economy as a whole has enjoyed the longest period of sustained low inflation that we've known in over a generation.

"We have also over the past seven years or so enjoyed the longest period of uninterrupted quarter-by-quarter economic growth in the UK as a whole since quarterly records began in 1955."

He added: "We - the MPC - were variously accused of ignoring the pain and suffering by firms north of the border' and of causing the Scottish economy once again to suffer because south-east England is overheating.

"There is nothing in the facts about the Scottish economy to suggest that the pursuit of monetary stability in the UK as a whole is in any sense at the expense of growth and employment north of the border.

"Indeed it seems clear on the facts that over time the Scottish economy prospers very much in line with the economy of the UK as a whole.

"So let's keep the national conflict where it belongs - on the rugby field."

But the leader of the Scottish National Party believes Mr George's views are far from reality.

He accused the monetary committee of ignoring Scotland and called for a new membership which represented the whole of the UK and not just the south of England.

Mr salmond said: "If you look at the make up of the committee it has members from Oxford and Cambridge and no one on it from the north of Potter's Bar.

"Mr George should confront the fact he is the head of the Bank of the South East of England.

"I believe the monetary committee should have new terms of reference and have new members who are able to reflect every aspect of the economy in the UK."

High street spending

Some experts say that the decision for the interest rates rise has been partly borne out by the latest figures from Scotland's high streets which reveal it was a bumper Christmas for retailers.

Sales, which were up in December and rose during the last 12 months, outpaced those in the UK as a whole.

After a sluggish start to the festive season for Scottish retailers, the Scottish Retail Consortium's latest survey shows that sales were up 0.6% in December.

The increase, based on a comparison against sales in December 1998 and not including new shops, is the first time a positive figure has been recorded since June last year.

Sales of food and drink were particularly impressive, but non-food sales are still giving cause for concern.

A spokesman for the SRC said it was too early to tell if sales of non-food items were recovering.