George sees growth rate slowing
Attending a meeting of Group of Seven finance ministers and central bank governors in Toronto, Mr George said that early action by the British authorities to tighten monetary conditions had meant that earlier fears of resurgent inflation expressed in themarkets had been overstated.
The half-point increase in British rates on Thursday, to 6.75 per cent for the bank base rate, marked the third such increase since last September.
The United States also raised rates by half-a-point on Wednesday last week.
Pointing to a turnaround in expectations with regard to both inflation and interest rates in Britain, Mr George said: "The markets were exaggerating the likely extent of inflation and the extent of the rise in interest rates to keep it on track."
Looking back to the first interest rate increase in September, he said: "Since we started, the implied peak in interest rates in the long end of the money markets and the bond market is now lower. That is reflected in the perception that by moving early we will keep the thing under control and that in the end have to do less. That is my belief."
Among all the Group of Seven ministers, there was a tangible atmosphere of self-congratulation that, in spite of surging growth in many of their countries, inflation appeared to be largely under control.
Kenneth Clarke, Chancellor of the Exchequer, said: "I think we are on the route for suststained growth while we all seem to be in control of our fiscal positions and of inlation."
Separately, the latest analysis from Henley Centre forecasts that the weakness of the British housing market will keep inflation under control without any further significant increases in interest rates this year.
The centre forecasts that house prices will rise by just 0.3 per cent in 1995, and that weakness in new mortgage lending will persist.
It expects interest rates to rise by only another half-point over the rest of the year, ending 1995 at 7.25.
The centre said there was a clear link between house prices and consumer spending. With house prices depressed and mortgage rates rising, real mortgage rates would stay strongly positive for some time. This would keep growth in consumer spending down to 2.3 per cent this year and below 3 per cent to the end of the century.
- 1 Finland schools: Subjects scrapped and replaced with 'topics' as country reforms its education system
- 2 The West has it totally wrong on Lee Kuan Yew
- 3 #FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
- 4 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
- 5 Zayn Malik quits One Direction: Hundreds of workers request compassionate leave following band member's exit
Germanwings captain Patrick Sondenheimer tried to break into locked cockpit door 'with an axe' as plane was descending
Amanda Knox murder conviction: Italian court overturns verdict for US student and Raffaele Sollecito in the killing of Meredith Kercher
Saudi Arabia says it won't rule out building nuclear weapons
The battle for the Middle East's future begins in Yemen as Saudi Arabia jumps into the abyss
#FreeTheNipple: Women in Iceland bare breasts in solidarity with trolled student
Nigel Farage brands LGBT activists 'filth' and 'scum' and accuses them of scaring away his children after they invade his local pub
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Russia threatens Denmark with nuclear weapons if it tries to join Nato defence shield
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Germanwings plane crash live: Co-pilot Andreas Lubitz wanted to 'do something people would remember him for'
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...