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London - British house prices could fall by about a third unless interest rates are cut fast, a senior Bank of England official warned on Tuesday.
David Blanchflower, one of the nine members of the Monetary Policy Committee that sets the bank's interest rates, said house prices could fall by 30% unless the bank cuts interest rates, adding that the country faced a "real risk" of falling into a recession.
"In my view a correction of approximately one-third in house prices does not seem implausible in the UK over a period of two or three years..." Blanchflower told the Royal Society in Edinburgh, Scotland.
"I am not suggesting that such a drop will necessarily occur, but it may. Cutting interest rates now may help to prevent such a dramatic fall," he said.
Drastic action
Blanchflower said urgent action was needed to keep Britain from following the US into what he said was clearly a recession.
"We need to take action to loosen policy sooner rather than later," Blanchflower said. "I do feel that the slower rates fall, the further they will eventually have to go down to boost the economy."
The US-based committee member earlier this year argued for deeper cuts to the bank's interest rates, saying the reduction was needed to ward off the risk of a "very sharp slowdown".
Blanchflower's comments were made available on the Bank of England's website late on Tuesday.
- AP