The Bank of England decided to leave interest rates on hold yesterday despite a survey published just a few hours earlier showing that house prices fell in January.
The decision had been unanimously expected in the City, but the outcome did little to settle the split over the likely direction of the next move in rates.
Analysts believe the minutes of the meeting to be published in two weeks will show signs of growing divisions inside the nine-strong Monetary Policy Committee (MPC) of economists at the Bank. Analysts will also look to the next week's quarterly inflation report, which contains the Bank's latest thinking on growth and inflation, for clues.
"We suspect that some on the committee seriously contemplated the case for lower rates and that, once again, the vote was not unanimous," Philip Shaw, at Investec, said. But Jonathan Said, at Centre for Economics and Business Research, said the Bank's concerns over inflation would keep rates on hold at 4.5 per cent.
Eleven consecutive rises in unemployment, increases in bankruptcies and rising utility bills have led many to forecast that growth will fail to live up to the Bank's forecast of more than 3 per cent next year. However recent figures on retail sales, consumer confidence and - most importantly - house prices and mortgage approvals, have pointed to a rebound in the consumer economy that would only be further fuelled by a rate cut.
That argument was slightly undercut by figures from Halifax showing the average price of a home dripped by 0.4 per cent last month, the first decline since May last year.
Prices have still risen 1.6 per cent over the past quarter. Martin Ellis, its chief economist, said the mixed pattern was a "feature of a slow housing market".
Howard Archer, at Global Insight, said the fall was a "welcome dose of reality" after four 1 per cent-plus monthly increases. "It reinforces our strong doubts that house prices will see sustained sharp rises over the coming months," he said.
Business groups focused their concerns on the state of manufacturing, which contracted by 1 per cent in the final quarter of last year, the worst since May last year.
David Frost, the director general of the British Chambers of Commerce, said: "We are disappointed that the MPC felt unable to take action to counter the adverse pressures affecting the economy."
The TUC warned the "disappointing" decision would lead to another year of low growth that would herald a fresh round of job losses "especially in the hard-pressed manufacturing sector".Reuse content