Howard Archer
Howard Archer
advantage brown budget clearly further minister mr prime
Mr Brown will clearly look to take advantage of the budget to further his credentials to take over as prime minister from Mr Blair.
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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.
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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,
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There is undeniably a growing risk that house prices could move markedly higher over the coming months. Indeed, this risk is clearly showing more prominently on the Bank of England's radar.
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This increased housing market activity has clearly led to some recent firming in house prices, and there is undeniably a risk that prices could move sharply higher over the coming months.
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The sector may see modest expansion in the first quarter of 2006, having been a major drag on overall growth in the fourth quarter.
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The strength of the public finances in January effectively guarantees that Brown will be able to avoid making any major tax hikes or significant spending cutbacks in March's budget.
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The slowdown in euro zone growth will not deter the ECB from raising interest rates in March and a further hike remains very likely in June.
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Euro region labor markets are finally beginning to see genuine, if somewhat limited, improvement, boosted by the pickup in growth since mid-2005. Rising employment is key to boosting consumer spending across the euro region.
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Flat export orders in February are particularly disappointing.
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Pretty healthy retail sales growth in November reinforces belief that consumer spending is picking up to some extent, and reduces the case for a near-term interest rate cut.
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Below the headline data there are some positive features that should not be overlooked.
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The testimonies to the Treasury Select Committee reinforce the impression that interest rates are set to remain on hold for several months to come.
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This significantly reduces the prospects of any interest cut until at least August. Indeed, it increases the odds that the eventual next move in interest rates could be up.