Howard Archer Sustained Quotations

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

Going forward, UK exporters will be fervently hoping that recent signs of improving growth in Western Europe will be sustained and will increasingly feed through to boost exports,

We believe the door is opening for an interest rate cut early in 2006 if the economy fails to show sustained significant signs of improvement over the next couple of months.

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.

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.

The limited correction in the Halifax house price index in January following the marked rises during the latter months of 2005 reinforces our strong doubts that house prices will see sustained sharp rises over the coming months.