Poor shop sales lift hopes of rate cut

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The Independent Online
The prospect of an early cut in interest rates propelled share prices sharply higher yesterday as official retail sales figures suggested reports of a boom in high street spending over Christmas were an illusion, writes Robert Chote.

An inflation rate jump to a nine-month high of 1.9 per cent was not seen as a barrier to a cut. It reflected Budget increases in tobacco and petrol duties, and year-old mortgage rates cuts falling out of the annual retail prices comparison.

Retail sales volume fell by 0.2 per cent in December, compared with City forecasts of a 0.5 per cent rise. The Chancellor said too much attention should not be paid to one month's figures, but pressure for a rate cut is likely to be boosted by a 'flattening recovery' warning from the British Chambers of Commerce.