The minutes of this months Committee meeting, released last Wednesday, confirmed that the greater concern is slowing growth rather than rising prices. The consensus view is that the credit crunch will slow growth in the medium term to a greater extent than rising energy prices will push up inflation in the short-term. With credit harder to obtain and more expensive consumers will find it increasingly difficult to re-mortgage at attractive prices. Since the domestic economy has expanded mainly as a result of equity release a looser monetary policy is highly likely, whatever hawkish comments are made. The actual result was 8-1 with David Blanchflower voting for a 50 point cut.

Thursday’s January retail sale volumes figures caught the markets by surprise. Volumes advanced by 0.8% in the month giving an annual rise of 5.6%. Naturally, Sterling gained significantly against the Dollar and money market rates tightened slightly. Capital Economics boldly stated that ”it’s too soon to write of UK consumers” and that these figures will reassure the Bank that the UK economy is not slowing too sharply. As ever though sales came at the expense of margin, electrical goods are on average 15% cheaper than last year, and whilst there is some life left in the high Street these numbers are indicative of the need for further Base Rate cuts. For some retailers though drastic action will be required sooner rather than later.

There is very little data due for release this week. The high point comes on Friday with the Banks, consumer credit, mortgage lending and mortgage approvals (all for January) due out. The latter two figures are expected to show declines – £0.4bln and 3,000 respectively whist consumer credit is actually predicted to have increased by £0.3bln – bargain hunters at the sales perhaps. Friday also sees this month’s GFK consumer confidence survey published. The despondent are expanding, the balance is expected to swell from –13 to –14, and misery does appear to enjoy company.