Green shoots coincide with Spring

However, in an address made to The Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) Birmingham yesterday, George refused to rule out a hike in interest rates in the near future for the good of the ‘general economy.

George said: "There has recently been encouraging evidence - in the US data particularly but also for example in many of the more forward-looking indicators of European economic activity - that we are now in the early stages of global recovery. We cannot be sure that the early momentum will be maintained; nor do we know just how strong the expansion will prove to be or how long it will last; but the signs are promising, and indeed far more positive than any of us would have dared to hope just six months or so ago in the aftermath of the terrorist attacks on New York and Washington.

"As it becomes clearer that the international environment really is improving, and that we really are seeing a sustained pick up in external demand, then we can look forward to better balanced and generally stronger growth in our own economy.

"That will in due course mean that domestic demand growth - and consumer demand growth in particular - will need to moderate if we are to avoid a build up of inflationary pressure. It is quite possible, even still quite likely, that the necessary moderation of consumer demand - and I emphasise the word moderation - will come about of its own accord.

"And that would be the best possible outcome for our own economy. But if consumer spending were not in due course to moderate of its own accord, and depending on the timing and the strength of the recovery abroad, we would clearly need at some point to consider raising interest rates to bring that moderation about.

"But for the time being, and whatever the precise numbers, the overall prospect for the British economy over the next couple of years is for output growth picking up to around trend and inflation to around target. And if that is indeed how things turn out, we will have weathered the international storm as well as anyone could reasonably have expected."