RATES: KEEP THEM DOWN!

All the worst things in American society turn up on these shores sooner or later, and interest rate rises are no exception. So in the light of recent developments across the Atlantic, the following message is timely. To quote: 'It would be a colossal policy error to raise bank rate in 1994... the biggest two-year increase in taxes since the war AND a rise in interest rates could cause a double-dip recession.'

These alarming words were uttered last week by the respected City analyst Angus Phaure, who spelt out starkly the growing fears in Construction that yet another obstacle to recovery may soon appear, which if it did, could prove fatal.

As Phaure noted, every building company in the country says recovery is still very delicately poised, and it would not take much to undermine and reverse it. 'A rise in bank rate would undermine confidence in the housing market' - upon which everything depends - 'and a renewed fall in house prices would recreate that awful downward spiral of reduction in wealth [leading to] increase in savings [leading to] reduction in consumer expenditure [leading to] reduction in GDP, which in 1990-92 caused the longest recession since the war.'

Crucially, in the view of Phaure and many others, not only is the economy in no state to withstand any rise, it is in no need of one. This is just as true of Construction as any other sphere of activity. The few apparent signs of overheating - delays for bricks and blocks, rocketing land prices, for example - will be shortlived. Materials shortages are being caused by housebuilders desperate for completions they may credit to the P&L account by 30 June; and despite land prices rising, house prices are not. 'There is nothing that I can see on the inflation front to cause the Government to start panicking,' concludes Phaure.

This logic aside, will there nevertheless be a rise? It is safe to conclude that the Government has no desire to raise interest rates. But with the Bank of England now effectively calling the shots, political considerations are no longer paramount in the decision-making process. These are still nail-biting times.