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Thursday, 3 February, 2000, 03:06 GMT
Chancellor 'backs rate rise'

Gordon Brown, the Chancellor of the Exchequer, has indicated he backs an interest rate rise to prevent the economy overheating.

Ahead of next Thursday's decision on rates by the Bank of England's Monetary Policy Committee, Mr Brown has made it plain that inflation has to be kept in check.

Gordon Brown Gordon Brown: No boom and bust
However he measured his words carefully to stave off claims he was interfering in the committee, which is supposed to be independent of government.

"I would support the Bank of England in the difficult decisions it has to take," Mr Brown said in an interview with The Times.

"It is important to recognise that the economy is growing and that we do not want to fall into the mistakes of the late 1980s.

"We are determined to avoid the problems of stop-go which bedevilled the economy in every previous cycle."

Faced with rising house prices and strong consumer demand, the committee will announce at noon whether it will raise interest rates from 5.75%.

Fed boss Alan Greenspan fears inflation will return
Mr Brown, who will announce a date for the Budget on Thursday, praised its members for taking "pre-emptive" action to dampen down demand through recent quarter-point rises.

"Consumer spending must not be allowed to get out of control," he said.

He also appeared to deflect questions on whether the Prime Minister's intention to raise health spending to the European average was an aspiration or a firm commitment.

Mr Brown said it was a long-term challenge which would be addressed in the next comprehensive spending settlement.

US raises interest rates

The Chancellor is not alone in voicing concern over the dangers of economies overheating.

The US central bank raised interest rates by 0.25% on Wednesday in a bid to cool the booming US economy. The decision could spark further rate increases around the world, raising the cost of finance to home owners and businesses alike.

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