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Last Updated: Monday, 25 September 2006, 15:05 GMT 16:05 UK
BoE deputy mulled rate rise vote
Bank of England building
Analysts expect UK interest rates to rise again this year
Senior Bank of England official Sir John Gieve has indicated that he considered voting to raise interest rates because of inflation concerns.

Speaking to the Financial Times, Sir John said that he had "already considered and got quite close to voting at one point in the minority".

His comments helped lift sterling against the euro and the US dollar.

Analysts said that they seemed to underline speculation that UK interest rates would rise again in November.

'Perfect sense'

Sir John is one of the eight members of Bank of England's Monetary Policy Committee (MPC) who voted unanimously to keep interest rates on hold at 4.75% earlier this month.

That decision came after interest rates were raised by 25 basis points, or a quarter of a percentage point, from 4.5% in August.

Despite a drop in world oil prices, many analysts now expect borrowing costs to increase again in November to 5%.

Graph showing Band of England rate rises
There's absolutely no doubt that the housing market is a big factor in the behaviour of the wider economy
Sir John Gieve, BoE

Sir John, who is Bank of England's deputy governor for financial stability, said the Bank was monitoring a number of factors, and while there where "some issues and uncertainties" he warned markets not to read too much into forecasts of a rate hike in November.

"That all makes perfect sense, but of course, life doesn't follow the central projection generally," he told the FT.

Sir John also explained the bank's view on house prices and their role in helping the MPC set the level of borrowing costs.

"We're trying to target consumer prices not asset prices, so basically the question is what are asset prices telling you about demand pressures in the economy," he explained.

"There's absolutely no doubt that the housing market is a big factor in the behaviour of the wider economy," he said.

'Worry list'

However, Sir John added that concerns about the housing market overheating had receded, and that while the Bank was watching developments, "it's not the top of the worry list at the moment".

Sir John identified growth prospects for the US economy - the world's largest - and the state of the US housing market as a key issue for UK rate setters.

He also said import prices were a big issue, with a question mark hanging over whether the period of globalisation and development in south-east Asia could continue to keep a lid on the cost of foreign goods.

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