Business View: While the weather's cold keep interest rates frozen

The sale signs have been up at the shops in Canary Wharf for some days now. And if retailing is doing badly next door to two of the most successful investment banks in Europe - CSFB and Morgan Stanley - what hope is there on the high streets of Huddersfield and Honiton?

Yet, if you believe the minutes of the Monetary Policy Committee (MPC), Britain is so healthy that the economy is in danger of overheating. Accordingly we can all look forward to an interest rate rise in the hungover first few days of the new millennium.

The problem that is worrying the MPC members appears to be pay. Wage inflation is running ahead of retail price inflation and is in danger of pulling prices up with it. Or so the MPC thinks. Such was their concern at the last MPC meeting that three members - the usually sensible John Vickers, the avowedly contrarian Willem Buiter and the worryingly influential Mervyn King - pushed for a quarter point rise this month.

For once Mr King broke ranks with his chums inside the Bank of England. This could be an indicator that the accusations that they act as a cabal are starting to hit home. However, I feel it is more likely that what this really indicates is that they will all vote together this month for a rate rise, thereby forcing the issue.

I have, however, to disagree with this strategy. January is not the time to be trying to put the lid on wage inflation. Very few pay deals are struck in January. The wage round tends not to get going until the spring at the earliest, so if you are trying to control inflation through controlling wages, this is not the time to be doing it.

Also the effect of the January sales - or should I say the late December, January and early February sales as they have now become - and the deflationary influence of the growing power of the e-commerce sector will not have fed through to the statistics that the MPC will use to help them make their January decision.

Now this might be a futile suggestion, especially if Mr King is feeling as hawkish as his friend Doug Ellis, the Aston Villa boss. But might not the MPC be more wise to hold fire on an interest rate hike until February? They can see whether a difficult Christmas on the high street has eased some of the inflationary pressures.

The market appears to think that any hike in rates will be a short-term measure, and that we will see interest rates back below 5 per cent in the not too distant future. So maybe it is better to avoid the Grand Old Duke of York school of economy management and be patient.

Hoerner's just deserts

PATIENCE, though, is running short for investors in Arcadia. John Hoerner was a City darling only a couple of years ago, having turned around the ailing Debenhams department store chain and masterminded a coup to lead a restructuring of Burton Group. But the decision to spin off Debenhams from the group, which is now called Arcadia, has not proved a success. Mr Hoerner's reaction to Arcadia's trading problems - to buy a portfolio of poorly performing Sears stores from Philip Green - appeared foolish at the time; in retrospect it has become clear that if Mr Green is selling you should not be buying.

Those who might feel sympathy for Mr Hoerner now should realise that he showed little mercy to others during his rapid ascent; nor has he many doubts about his own abilities. After all, in business, you reap what you sow.

n j.nisse@independent.co.uk

Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
News
i100
Sport
Rooney celebrates with striker-partner Radamel Falcao after the pair combine to put United ahead
footballManchester United vs Newcastle match report
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all