New Bank chief economist grilled by MPs

LONDON (Reuters) - Spencer Dale, appointed Bank of England chief economist last month, was questioned by MPs on Wednesday.

Following are highlights from the session.

ON HOUSING MARKET

"One of the important shocks that we are trying to respond to at the moment is the slowing in the economy associated with the tightening in credit conditions. An important dynamic in whether tighter credit conditions affect the real economy is via the housing market.

"We do see the housing market starting to slow. We see house prices falling since the autumn of last year. We see housing market activity also falling.

"If we think that the adjustment in the housing market is causing output to slow to an extent that will lead to a very pronounced downturn in the economy which will threaten the medium term inflation target then I think it appropriate for the Monetary Policy Committee to respond to that.

"ON INFLATION EXPECTATIONS

"It's entirely understandable and reasonable when survey measures of household inflation expectations one year ahead have risen in line with the Bank's own inflation forecast. What is far more worrying is if household expectations for inflation further out start to show signs of picking up."

"The evidence that household inflation expectations beyond one year have picked up is far less clear."