Some of the concerns out there about CPI hitting 3% ... at least in the short term look overdone.
It's not particularly substantial. Especially if you look at it from the point of view of the more than 450 billion pounds of government spending every year.
Evidence of stronger consumer demand over Christmas probably means the hawks can hold the line in February, but the risks for base rates remain skewed to the downside.
When you've got inflation rising above the bank's target it reinforces the view that we don't need more rate cuts this year.
Job cuts are mainly coming from manufacturers, who are still suffering. We are going to see further increases in the claimant count rate and the odds of any sort of wage inflation problem emerging are diminishing rapidly.
The faltering global recovery means we would not be surprised to see a rate cut, but with the UK having held up well... we stick to our forecast for rates to remain on hold.
From an inflation perspective these are reassuring numbers: If manufacturers can't raise their prices when input cost inflation is running at an all-time high, when can they?
Compared with the slowdown at the start of the year, these numbers look a little healthier. In the short term, the numbers don't help the case for rate cuts.
Of the Group of Seven economies the UK is in the best shape but there is a risk to the downside, ... There's not much data post September 11. A quarter point cut as a precautionary measure will not be too much of a risk.
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