Figures published by the Bank showed that the amount of cash in circulation rose more than expected last month. The most important component of the narrow money measure, M0, it pointed to a strong upward trend in spending.
Separate reports put flesh on the bones of the official statistics. Barclaycard said Christmas Eve spending on plastic by its customers set a record of pounds 1,700 a second. The bank's cash machines dispensed pounds 378m in the week before Christmas, 12 per cent more than the same week in the previous year.
John Lewis, the department store and supermarket group, described sales in the three days before Christmas and the first day of its clearance sale as "outstandingly strong". This followed turnover at a record pounds 60m in its department stores in the week before Christmas.
Share prices rose yesterday, driven by a further surge on Wall Street where analysts returned to work optimistic about US economic prospects. The FTSE 100 index ended 17 points higher at 4,106.5, while the Dow Jones industrial average climbed above 6,600 in morning trading and ended up 23 points at 6,567.
Yet the overwhelming majority of City analysts believe that UK base rates will rise by a quarter point to 6.25 per cent either after next week's monetary meeting or at the following one in early February. The betting in the financial futures market is that rates will be a full point above their present level by the end of June.
"The decision is clear. It is a question of when rather than if it is taken," said Kevin Gardiner at investment bank Morgan Stanley.
Even those economists who reckon the economy is not as overheated as buoyant consumer spending makes it seem agree that the move will take place. "Kenneth Clarke will find himself under heavy pressure to raise base rates in January or February," Jonathan Loynes at HSBC Markets said.
Figures for the number of people claiming unemployment benefit in December, due the same day as the next meeting between Mr Clarke and Eddie George, could provide political cover for a base rate rise if they fall sharply for the second month running. Waiting for the preliminary estimate of GDP growth in the final quarter, due at the end of January, would be the excuse for delay.
Yesterday's statistics showed a 0.9 per cent increase in M0 last month, with the annual growth rate slowing to 7.1 per cent. Notes and coin in circulation rose 0.7 per cent during the month, with their annual growth unchanged at 7.4 per cent. Both have remained above 7 per cent since June.
The narrow money measure is not an accurate guide to month-to-month changes in spending but gives a reasonable guide to retail sales trends.
The figures took the pound briefly above DM2.66 but it closed nearly unchanged at DM2.6369.Reuse content