We suspect economic activity over much of 2006 will be held back by sluggish consumer spending and that the Bank of England's growth forecast will prove to be too optimistic. |
What happens after the October meeting is far from clear. |
While it is clearly premature to sound the all-clear on inflation, the October consumer prices data are largely reassuring for the Bank of England and boost hopes that inflation has peaked, |
While the CBI survey indicated a marked softening in consumer spending following the relatively strong December performance, it nevertheless indicated a significantly stronger performance than that seen overall in recent months. |
While the February mortgage lending and approval data are relatively healthy, there are hints that housing market activity could be starting to lose momentum after several months of improvement. |
While the fourth quarter GDP data and the relatively healthy mix of the components further diminishes the chances of a near-term trimming of interest rates, we still believe a 25 basis point interest rate cut is very possible in May. |
While we believe that it is premature to rule out another 25-basis-point cut before the end of this year, we acknowledge that the odds are increasing that it will be delayed until early 2006. |
With consumer price inflation below the 2% target level in both December and January and clearly below the levels forecast by the Bank of England in their November quarterly inflation report, a near-term interest rate cut suddenly looks a very real possibility again. |
With economic growth likely to remain below trend in the near term at least and unemployment set to continue rising, there is a very real danger that individual insolvencies and mortgage repossessions will climb markedly further over the coming months. |
With one member of the MPC voting for an interest rate cut in December and Bank of England chief economist, Charlie Bean, recently making some dovish comments, the odds of an interest rate cut early in 2006 are rising. |
Year-on-year growth of 2.2-percent exactly matched the Bank of England's forecast... reinforcing expectations that interest rates are set to remain unchanged for several more months to come. |