Howard Archer Remain Quotations

The Bank of England will be pleased to see that producer output prices remained largely contained in December, but less good news is the further sharp increase in input prices as gas prices soared.

House prices are likely to remain relatively flat for an extended period,

Year-on-year growth of 2.2-percent exactly matched the Bank of England's forecast... reinforcing expectations that interest rates are set to remain unchanged for several more months to come.

With economic growth likely to remain below trend in the near term at least and unemployment set to continue rising, there is a very real danger that individual insolvencies and mortgage repossessions will climb markedly further over the coming months.

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

The MPC could remain on the sidelines for some months to come as it monitors the strength of consumer spending and the housing market, and also looks to see if high oil and energy prices are feeding through to have second round inflationary effects.

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.

The combination of rising unemployment, falling employment and muted earnings growth is hardly supportive for consumer spending. It reinforces our belief that overall growth will be softer than forecast by the Bank of England and that underlying inflationary pressures will remain muted.

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 testimonies to the Treasury Select Committee reinforce the impression that interest rates are set to remain on hold for several months to come.

All the indications are that the ECB remains inclined to tighten monetary policy further over the coming months to contain inflationary risks.

This reinforces our belief that consumer spending will remain subdued for some time to come despite September's pick-up in retail sales.

This is likely to put a floor under house prices, but we remain highly doubtful that house prices will move substantially higher on a sustained basis any time soon. If house prices start to accelerate markedly, we believe buyer interest will soon diminish, thereby keeping a lid on prices.