Tim Besley, a member of the Bank of England's rate-setting Monetary Policy Committee, today gave warning that economic growth would slow as consumers battened down the hatches after the credit crunch. He said that tighter lending criteria could lead to a slowdown in consumer spending and a rise in savings ratios.

Speaking at the Institute for Fiscal Studies, Mr Besley said: "With credit conditions tightening, we might expect a significant reduction in consumption growth over the coming months."

In what some economists may call a doveish speech, Mr Besley said that conditions in the financial markets should play a key role in the MPC's decisions.

“My time on the MPC, before and after the events of last summer, has reinforced my view that considerable weight should be placed on conditions in financial markets in understanding the transmission of monetary policy to the real economy,” he said.

“The impact that the level of Bank Rate has on activity will depend, to some extent, on the conditions that are obtained in financial markets. Judging whether a given level of Bank Rate is restrictive depends importantly upon the conditions that prevail in financial markets at the time,” he added.

His comments come just days after the Bank of England released its quarterly inflation report which indicated that further rate cuts would not be imminent, or aggressive. Most economists do not expect another quarter point rate cut until May. Hoewever, in light of Mr Besley's comments, the MPC may fell compelled to act sooner if the markets tumble or house prices start to plummet.

Howard Archer, of Global Insight, said: "Besley's comments are balanced regarding the downside growth and upside inflation risks and he stresses that he will make a month-by-month assessment of the balance of these risks. This apparent balanced stance may be seen as significant in itself, given Besley's hawkish behaviour in his voting behaviour so far during his time on the Monetary Policy Committee."

Mr Besley used the speech to outline research he has been conducting. "The results that I am discussing today are helping to shape my view of how developments in financial markets are likely to affect the path of household consumption in the next year or so." He concludes that households' access to cheap loans and equity in their homes may have played a part in the recent fall in the savings ratio, but Mr Besley now expected the savings ratio to rise as households rein in their spending.

"These findings are consistent with the view that households will rebuild their savings over the medium term. Depending on how credit market conditions stabilise, this may have only a temporary effect on consumption growth. However, there is a great deal of uncertainty," he said.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive