The Economic Secretary to the Treasury, Patricia Hewitt, said the bank's priority was not to aim for greater general economic convergence with Europe.

Instead she said its primary objective must remain that of "delivering price stability", as indicated by the inflation target.

"It would be extremely foolish to confuse that inflation target with a different target," she said.

The government has promised to hold a euro referendum

Ms Hewitt was speaking in a debate on Europe's economic and monetary union (EMU). She ruled out adopting the Euro in the UK until after the next election.

Prime Minister Tony Blair also reiterated on Wednesday his decision that no moves would be made to join the euro before the next election, which must be held by 2002.

"There's no way you will have convergence before the next election. It can't happen," he told The Scotsman newspaper.

Last week he unveiled a blueprint of how the business community and public services should prepare for eventual entry into the single currency.

Government defends policy

The government has said the UK will join the 11-nation euro zone as soon as it is in the country's economic interests.

But opposition parties have questioned its euro policy.

They queried how it intends to achieve the necessary convergence with Europe unless it shadows the new euro currency or interest rates in the euro zone.

UK interest rates, currently at 5.5%, are nearly double eurozone levels.