Ex-MPC Man Hits at Bank on House Prices

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Byline: JANE PADGHAM

THE Bank of England's monetary policy committee was today under fire from one of its former members for failing to take the housing market into account when setting interest rates.

Charles Goodhart, professor of economics and banking at the London School of Economics and part-time adviser to the Bank's Governor Sir Edward George, said paying more attention to property prices would ensure more stability in both inflation and output.

Heeding the advice, which comes from one of the country's leading experts on monetary policy, would have major implications for interest rates. House prices are currently rising faster than at any time since the late-1980s boom, implying that the cost of borrowing needs to be higher. The International Monetary Fund said recently soaring property values needed "careful watching".

Goodhart, in new research delivered today to the Royal Economic Society's annual conference with Boris Hofmann of Bonn University, said the MPC should also put more emphasis on stock market movements, although they had fewer implications than house price movements. …

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