Economists have questioned the optimistic view of the UK's economy offered by Sir Edward George, the governor of the Bank of England.

Sir Edward, speaking to BBC Radio 4's Today programme, suggested a moderate slowing of growth in both house prices and consumer spending in the year ahead.

But analysts have suggested there is a real threat of a more abrupt downturn and that a recession is still a real possibility.

Jonathan Loynes, chief UK economist for the consultancy firm Capital Economics, said the governor's views "look very much like a best case scenario".

Recession?

Mr Loynes has a less rosy view of the UK economy's future.

"In history, whenever there's been a boom in house price inflation, as we've seen in the last two or three years, this has been followed by a recession in the general economy," he told BBC News Online.

But Sir Edward cautioned against reading too much into the various economic reports that are predicting tough times ahead.

We don't think there's a general perception that there will be a sharp crash Sir Edward George

He told the Today programme: "You shouldn't put too much weight on surveys, at this time of the year in particular."

Instead, Sir Edward forecast a "gradual moderation" of key economic indicators such as house price growth and spending on the High Street.

Keeping perspective

The governor pointed to the Nationwide's house price survey, which suggested property prices would continue to grow by 10% in 2003, albeit a more modest rate of growth than the 25% enjoyed in 2002.

"You've got to keep things in perspective," he told the programme, saying that prices would not actually fall, they would just rise more slowly.

"We're anticipating quite a sharp moderation in the rate of increase in house prices and that's consistent with a gradual moderation in the growth of consumer spending.

"We don't think there's a general perception that there will be a sharp crash."

Less optimism

The house lenders have a vested interest in prophesying a soft landing Vincent Cable, Liberal Democrat

Sir Edward's upbeat tone was not matched by Vincent Cable, the Liberal Democrats' trade and industry spokesman.

He described the current level of consumer borrowing as "unsustainable and dangerous" and told the Today programme that there was a strong chance of a "dramatic" fall in property prices.

"The house lenders have a vested interest in prophesying a soft landing but it may be very unpleasant," he said.

Mr Loynes agreed: "We are set for another year or two of pretty weak economic growth, certainly weaker than the forecasts that the policymakers and the government have been producing."

Risk assessment

Sir Edward, whose second five-year term of office ends on 30 June 2003, admitted there were risks to his positive view.

He said the most important danger was the direction of global economics.

I don't think banks lend money if they think they're taking extraordinary risks. Sir Edward George

"I think what would help the UK economy more than anything else I can think of is for a clearly established recovery in the world economy."

And he also conceded there was a danger that "the UK consumer would cut back on spending more than we'd like to see".

But he was optimistic: "We're still hopeful that the global economy will pick up."

Banking responsibility

Asked whether there was a responsibility on the part of the Bank of England, or banks in general, to caution customers about the risks, Sir Edward said:

"I don't think banks lend money if they think they're taking extraordinary risks.

"It's not for us to tell the private sector how to behave."

Instead, Sir Edward said he would continue to monitor actual developments, look at all data as a whole, and "respond as necessary if we think those risks are crystallising".

Rate cut?

A number of economists, including Mr Loynes, have suggested a cut in interest rates would ward off such a gloomy picture.

But Sir Edward disagreed: "On the basis that we're anticipating that the UK economy will grow close to trend, that inflation will remain close to target, that's not something that implies a sharp change in interest rates in either direction."