Howard Archer Evidence Quotations

No change was no surprise, given recent overall evidence of modestly stronger economic activity and a more robust housing market.

The MPC still has to see conclusive sustained evidence that 2006 pay settlements are remaining contained.

December survey evidence showing robust service sector activity, stronger retail sales and firmer house prices has temporarily at least alleviated some concern over the economy's softness and eased pressure on the MPC for an imminent cut in interest rates.

This confirms that late in 2005 there was still no evidence that pay was starting to be pushed up by recently higher consumer price inflation and increasing energy bills.

The Bank of England currently seems unlikely to act before August given that growth in the first quarter appears to have been around trend, while survey evidence indicates that inflationary expectations have risen recently.

Healthy mortgage lending data show that housing market activity extended its recent firmer performance in December. This is also borne out by the latest survey evidence consistently showing increased buyer interest.

The evidence of marked improvement in the manufacturing sector further guarantees there will be no interest rate cut this Thursday. Indeed, we admit it is looking increasingly questionable whether interest rates will be trimmed further.

The earnings data may encourage the Bank of England to hold off from cutting interest rates in the immediate future as March while it seeks sustained clear evidence that the pay settlements for 2006 are remaining contained (the early signs are that wage moderation is continuing). However, we believe that interest rates are likely to be trimmed by a further 25 basis points by May.

The climb in annual house price inflation to 2.5 per cent in November from a nine-year low of 1.8 per cent in October reported by the ODPM adds to the recent evidence that house prices have firmed to a limited degree recently amid stronger housing market activity and increased buyer interest.