THE economy is a long way from recession, a member of the Bank of England's rate-setting committee told The Northern Echo yesterday.

Marian Bell, a member of the monetary policy committee (MPC), which meets once a month to assess interest rates and inflation, was in the region yesterday on a fact-finding mission.

She said that despite cost pressures on manufacturers, there was little the MPC could do, saying the impact on inflation was short-term and prices would settle.

She was reacting to business feedback about the bank's quarterly inflation report released this week.

Although she acknowledged there were risks of a downturn in the economy because consumer spending, particularly on vehicles and white goods had slowed, she said it was a long, long way from recession.

Fears had been raised that Britain was heading towards another recession because of the number of job losses and the slowdown in spending.

But Ms Bell told The Northern Echo: "At the moment, we have a situation where output in the economy seems to be growing quite steadily, particularly in the service sector.

"However, some of the latest manufacturing data has suggested a slowdown in that sector.

"Price pressure is notable, and there is certainly a concern among a lot of manufacturers about these cost pressures. But of course, our job is to make sure that the extent to which those costs are passed on is limited.

"Higher oil and steel prices will put inflation up in the short term but then, after a while, it will drop out.

"We have to make sure that consumer price inflation is only two per cent.

"Fortunately, labour costs have not risen too much.

"In the North-East, there are fairly low levels of unemployment at the moment and difficulties recruiting people in some sectors - but thankfully that hasn't led to a pick up in wage inflation."

Ms Bell, who visited Darlington Building Society's headquarters and Sherwoods car dealers in the town, said she believed businesses in the region were optimistic and that the service sector was growing well.