Bank's Besley not alarmed by weaker consumer spending

LONDON (Reuters) - A period of weaker consumer spending and house price stagnation may be necessary to rebalance the economy, Bank of England policymaker Timothy Besley said in a newspaper interview published on Tuesday.

"I don't think having a modest reduction in consumer spending -- which leads to people rebuilding their savings and putting themselves into a stronger financial position -- is in the wider scheme of things tremendously damaging to the UK economy," he said in an interview with the Daily Mail.

"A period of relatively stable house prices is not something that should set any alarm bells ringing."

Although Besley is one of the most hawkish members of the Bank's monetary policy committee, he voted for both the quarter-point cuts since December that have eased official interest rates to 5.25 percent.

He said he was worried about a further spike in inflation this year, but was undecided on which was stronger -- the downside risk to growth or the upside risk to inflation.

"I'm largely agnostic in terms of which of the two risks is dominant at this point. They are both real," he said.

Besley said there was a danger that policymakers could become too focused on the softer outlook for real estate, banking and retailing.

"We actually need to need to take a broader view of the other parts of the economy that will in the short term be less susceptible to the shocks that are going on," he said.

(Reporting by Christina Fincher and Matt Falloon; Editing by Ruth Pitchford)