The Chief Secretary to the Treasury, Stephen Byers, was accused by Tories of a "gaffe" by compromising the independence of the Bank with a call for "significant decisions" over interest rates.
The Bank will be irritated by any move which could be seen as applying pressure on the monetary policy committee (MPC) to cut interest rates again. Sources at the Bank complained earlier this month that the Chancellor was attempting to "bounce" it into a rates cut before the MPC's latest quarter per cent reduction in interest rates, with hints that he would slash the forecast for growth to 1 per cent in next week's pre-Budget statement.
Mr Byers told MPs: "We hope interest rates have peaked at 7.5 per cent and that they are on their way down. Certainly announcements from the Bank of England show that the balance of risks has now changed as far as inflation is concerned. So, I hope that we will see some significant decisions being made over the next few weeks."
Mr Byers added that he was being guarded in what he said because he did not want to be seen to be putting pressure on the Governor of the Bank of England, Eddie George.
Accusing Mr Byers of a gaffe, a former Treasury adviser, Andrew Tyrie, the Conservative MP for Chichester, said: "This is yet another example of the Government putting the thumbscrews on the Bank. So much for the Bank of England's independence."
Late last night Mr Byers issued a statement saying: "No pressure was being placed on the Bank of England....This Government will support the Bank in whatever tough decision it has to make."
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