Nick Kounis Quotations

House prices are significantly over-valued and we therefore assume that the current upswing will be relatively short-lived.

The news on the inflation front has been broadly positive. The combination of economic growth regaining momentum and inflationary pressures remaining well contained will keep rates on hold for an extended period.

The Bank of England still seem to regard the labor market as broadly stable and I think this is right. For the whole of 2005 we have only seen the unemployment rate tick up a couple of points.

Taken together with the buoyancy of the service sector, the manufacturing figures leave us on track for trend GDP growth, or even slightly better, going into this year, which is consistent with the MPC keeping interest rates on hold.

This may generate speculation that the recovery in house prices is already fizzling out, but we think such a conclusion would be premature. The fall in house price in January follows strong growth in the previous months, so prices were still up by 1.9% three months-on-three months in January.

The figures continue the recent run of reports suggesting that underlying inflationary pressures remain muted. They suggest the bank does have room to cut rates if growth disappoints going forward.

We see inflation hovering at around these levels throughout the first half of this year. If oil prices remain well-behaved, we should see slightly below-target inflation in the second half.