Blanchflower says another rate rise not certain

A general views shows the Bank of England in London November 9, 2006. Another rise in interest rates is not a foregone conclusion, a traditionally dovish member of the Bank of England's rate-setting Monetary Policy Committee, David Blanchflower, was quoted on Sunday as saying.

LONDON (Reuters) - Another rise in interest rates is not a foregone conclusion, a traditionally dovish member of the Bank of England's rate-setting Monetary Policy Committee, David Blanchflower, was quoted on Sunday as saying.

Some BoE policy makers considered raising interest rates by half a percentage point in May before all nine settled for a quarter point increase to 5.5 percent.

They also said the bank rate could go higher if the economy continued to develop broadly in line with expectations.

But the Observer newspaper quoted Blanchflower as saying in an interview a further rate rise to 5.75 percent was not a foregone conclusion.

"I don't think the MPC has backed itself into a corner," said Blanchflower, who as recently as March called for a cut in rates. "I think it's important for people to get the right balance; we're on the case. We cannot forecast from meeting to meeting what the MPC's going to do."

A Reuters poll last week found there was a near one-in-three chance interest rates will hit 6.0 percent this year, with a summer hike to 5.75 percent even more certain.

Blanchflower said if inflationary pressures continued, the BoE would act. However, he said cheaper labour due to immigration from eastern Europe could help keep inflation under control by keeping a lid on wage rises.

"If there is pressure which pushes up inflation, we'll do something about it -- I'm as hawkish as everyone on that fact," Blanchflower said.

"But if the data aren't supportive and we see the labour market is weak, there's an effect on consumption, and the housing market is slow, then we'll act," he added.

Explaining why he backed the rate rise this month, Blanchflower said with rising food prices, more robust world growth and British inflation hitting 3.1 percent in March, "I felt it was important to let people know that we were on the case and that inflation expectations have to remain anchored."

"I think there is some evidence of robust growth, both nationally and internationally, and also oil prices have ticked back up again. The housing market still looks pretty buoyant."

But The Observer said Blanchflower appeared ready to switch camps again if he believed the data demanded it.

"If we have to, we can reverse it (the rate rise)," he said.

The newspaper said Blanchflower made clear in the interview he would place less weight than some of his fellow MPC members on what firms said they were planning to do with prices.

"People say they are going to increase prices, but the question is whether they actually can," he said.