The UK's Chancellor of the Exchequer Gordon Brown has signalled that he would support the Bank of England if it chose to raise interest rates.

The Chancellor was speaking ahead of his annual Mansion House speech to the financial community.

His comments could put pressure on the Bank of England to raise interest rates, currently at a historic low of 4%.

In the same interview, the Chancellor indicated that recent falls in the pound against the euro would not influence the government's decision on membership of the eurozone.

"The Bank will have tough choices to make in the coming months to ensure sustainable growth and the maintenance of stability," he said in the Financial Times.

He added: "We will as a government continue to back the Bank in the difficult decisions that they have to make."

In an interview with BBC Radio 4's Today programme, he pointed to rising consumer demand and a strengthening world economy and stressed the need to be vigilant.

Mortgage boom

Rising house prices have so far failed to deter buyers - and fear exists that house prices could eventually crash.

Earlier this week, data from the Council of Mortgage Lenders and the British Bankers' Association showed that mortgage lending reached a record high in May.

The Council of Mortgage Lenders is - unusually - among those advocating the wisdom of a rise in interest rates. It hopes that a rise in interest rates now will reduce the chances of a property price crash later.

However, fears about weakness in the manufacturing sector have so far influenced the Monetary Policy Committee's decision to keep interest rates at a 40-year low.

Euro strength

The Chancellor also indicated that the Treasury's decision on joining the euro would not be influenced by the pound's weakness against the euro.

"The important thing I think the British people do understand is that these decisions have got to be made with a view to the long term future of the economy, rather than simply on short-run considerations," he said.

He said that next month's public spending review will aim to stimulate productivity.

In his speech later on Wednesday, he told BBC's Radio 4 that what he will "be concentrating on is not just the short term factors, but what we have to do as a nation to become a more productive economy".

Defence, asylum and crime will also have a role to play.

"It is bound to be the case in the global economy that foreign affairs, defence and international development have a new role to play and therefore have an importance in the spending review...problems of law and order, have got to be given the priority they deserve as well," he added.