The Week Ahead: Bank boss will have some explaining to do at No 11

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The Independent Online

Mervyn King, the Governor of the Bank of England, unleashed shock and awe in the City last week with his surprise interest rate rise. The decision set off a storm of speculation as to what the main factor was that pushed the Bank to hike the borrowing rate earlier than just about everyone had expected. This week, economists and analysts will get the answers they are looking for in the form of several key economics reports.

Most important will be the consumer price index numbers to be unveiled on Tuesday; the Bank's Monetary Policy Committee had been given these figures last week. Most economists are betting that they will reveal an inflation rate of at least 3 per cent. If that happens, Mr King will have to eat some humble pie and write a letter explaining the situation to Chancellor Gordon Brown.

The Bank has a target inflation rate of 2 per cent. If it swings one percentage point in either direction, the Governor is obliged to explain why and what the Bank plans to do to bring it back in line. Karen Ward of HSBC is expecting the consumer price index to come in at 3.1 per cent. "The rate decision places even more emphasis on this number," she said.

The letter may be straightforward enough, but it is also about retaining the Bank's credibility and its role in regulating the country's economic rhythm. "It would be a pretty easy letter to write: gas prices have rocketed, food prices have remained strong - there are a lot of factors," said Ms Ward. "The Bank will want to be seen as being proactive in this."

Also keenly watched will be the labour market data to be released by the Office for National Statistics. The last set of figures, for the three months through to October, showed a massive drop of 93,000 full-time jobs. "The last time we saw numbers like that was in the recession," said Ms Ward.

Those statistics were partly offset by increases in part-time work, but economists will be hoping for signs that the job market has regained some ground, or at least halted its slide.

Also included in the report will be wage-growth numbers. The number of people in full- time work will have far-reaching implications for the rest of the economy, from the strength of house-price growth to consumption levels.

In tandem with the blizzard of economic data, several of the UK's biggest retail names will give trading updates that should complete the picture of the holiday shopping period. These companies include Tesco, Debenhams, Woolworths, Burberry, Kesa Electricals, Ted Baker, Mothercare and Game Group.

Electronics retailer DSG International has its interim earnings results on Wednesday, which analysts are expecting to be strong. Taken together, retail analysts expect a pattern to emerge in which those retailers that had a solid 2006 will have done well over Christmas, while those in the doldrums sink even further.

Vedanta will unveil third-quarter earnings on Monday, and investors will be hoping for a better showing than it managed in November, when the copper and zinc producer missed first-half profit estimates.

The company will be pressed on its Zambian operations, where it has had to stop production due to power cuts and government intervention. But its numbers, both on production and financially, are expected to be solid.

Another miner set for a strong showing is Rio Tinto. The company's production results on Wednesday are expected to highlight strong iron-ore output in China, as well as record production of coal and aluminium.

Analysts are expecting no great surprise from Misys, the financial software provider that is still suffering from a hangover after a tumultuous year in which it was the subject of a great deal of takeover speculation. Analysts will be keen for an update from Mike Lawrie, the replacement for chief executive Kevin Lomax, who left when bid talks ended last October.

After six weeks in the job, Mr Lawrie predicted that Misys would be a three- to five-year turnaround project. After a couple more months in the chair, the City will want details on how he hopes to move forward.

Finally, brewing giant SABMiller is set to keep the City fizzing with a bumper trading statement on Wednesday. It will be the first quarter in which recently acquired South American businesses will be included, and analysts are expecting the hot weather and strong numbers earlier in the year to show through once again.


Tomorrow 15

UK RESULTS: (Interim) Vedanta Reources

Tuesday 16

UK RESULTS: (I) Begbies Traynor

Wednesday 17

UK RESULTS: (I) DSG International, DTZ

Thursday 18

UK RESULTS: (Final) Bede; (I) Bespak, QXL Ricardo

Friday 19

UK RESULTS: No companies reporting