October 17, 2002	Thursday	Sha'aban 10, 1423

LONDON, Oct 16: Bank of England Governor Sir Edward George said on Wednesday that the global economy was picking up and this could eventually put upward pressure on British interest rates if consumer demand does not slow.

His comments followed remarks on Tuesday in which he said debate had recently shifted to whether or not international and British interest rates should be cut to provide further monetary stimulus for weak economies.

“I think the global economy has turned the corner,” George said in an interview with a local radio station in northwest England, BBC Radio Merseyside.

George said nothing to suggest that the BoE was in any way close to considering raising borrowing costs yet.

Asked if he had hinted on Tuesday that rates would be cut, George said “may” was the appropriate word. He pointed out the central bank’s dilemma of a weak global economy and surging consumer demand.”

But he made it clear that if the world economy did indeed recover, then the Bank of England would have to act to moderate the pace of consumer demand from current unsustainable levels.

“Clearly the rate of growth of consumer spending cannot continue,” he said.

Britain’s economy shows sharply divergent tendencies at present. While manufacturing industry is struggling to grow, house prices are booming and shopping centres busy.

Sterling pushed higher against the euro and the dollar after dealers took George’s latest comments as reducing the chances of a rate cut.

But economists said the markets would still be left to second-guess the outlook for rates for now.

US economy: US Treasury Secretary Paul O’Neill said on Wednesday that the US economy was progressing well but that it was uneven across sectors.

O’Neill told a forum held by the National Association of Manufacturers that based on his recent travels around the country, he believed that the “doom and gloom” views of the US economy are not supported by reality.

“The evidence I’ve seen doesn’t support doom and gloom. It supports what I tend to call the bumpy-road recovery,” he said.

O’Neill did not comment on the US dollar, a subject of key interest to US manufacturers who complain its strength against other major currencies has hurt their profits.—Reuters