The British Treasury said on Sunday no decision had yet been made about reappointing the Bank of England governor, Mr Eddie George. A spokesman said a report in the Sunday Times that the British government was set to extend Mr George's appointment for a further two years was speculative.

"No decision has been taken yet. They are speculating," he said.

The Sunday Times quoted unidentified government officials as saying the Chancellor of the Exchequer, Mr Gordon Brown, was to meet Mr George shortly to discuss his future. His current contract runs until June.

It said senior ministers believed Brown favoured a two-year extension of Mr George's tenure rather than a five-year contract.

"There's a strong argument in favour of stability," one unnamed minister was quoted as saying.

The newspaper said keeping Mr George (59), in the job for another two years would allow the government to bring in a new governor in time to see through Britain's possible entry into a single currency soon after the next general election, likely to be held in 2001 or 2002.

The Observer also said Mr George was expected to be reappointed as governor, saying he was far and away the favoured choice in London's financial district.