Homeowners facing a hike in borrowing costs were yesterday told by a senior Treasury official that a rise would help "lock in" economic stability.

Ed Balls, Treasury chief economic adviser, made the comments as the Bank of England monetary policy committee began its monthly two-day rate-setting meeting.

It is almost certain to raise interest rates to four per cent today.

In a speech to a local government conference, Mr Balls said: "There is now a consensus across industry and the regions that a forward-looking and pre-emptive approach to monetary policy, backed by a sound fiscal policy, is the best way to lock in stability and deliver balanced regional growth."

But union leaders warned increasing interest rates would damage any improvement in manufacturing firms.

Thursday February 05, 2004