Tucker hints at April rate rise

Clear signs that the Bank of England is gearing up for an increase in interest rates emerged yesterday when a member of its monetary policy committee said stronger than expected growth and a booming housing market could increase inflationary pressure.

Paul Tucker, the Bank's executive director in charge of financial markets, said it would be necessary to remove the boost to growth that cheap borrowing gave the economy when it was struggling as a result of the global downturn.

Speaking to fund managers in the City, Mr Tucker said if the current trends continued he would expect the MPC "gradually to reduce the degree of stimulus to demand broadly in line with the take up of slack in the economy and any consequent pick up in inflationary pressures looking ahead".

Analysts said this speech was preparing the ground for an interest rate rise in April - rather than May as is forecast. "I think this speech is massaging expectations towards an April rate rise," said Richard Iley, economist at BNP Paribas.

Mr Tucker's speech followed the release of "hawkish" minutes of the MPC's March meeting this week. These showed that although all nine members voted to keep rates on hold, the committee was concerned about the continuing growth of consumer debt and house prices and feared that a move would surprise the markets and push up the value of sterling.

"There is clearly some agonising by the MPC whether their cautious approach to rate rises is the most effective course of action," added Mr Iley.