The Week Ahead While G8 gets the razzmatazz, rate watchers look to base line

The minutes from the Monetary Policy Committee's last meeting showed two of its nine members had voted for a cut, including chief economist Charlie Bean. Despite this, few believe there will be a reduction in the cost of borrowing come Thursday. But a cut is expected at some point this year, and could come as soon as August.

"We think the committee will keep base rates on hold this time," says Philip Shaw, chief economist of Investec. "However, the weaker GDP data suggests to us that rates will come down this year and we're now forecasting a quarter per cent cut [in] August.

"A prompt downward move would enable the committee to lower rates gradually if need be. This would be a mirror image of its strategy when it began to tighten towards the end of 2003."

The ECB is likely to be more conservative, however, with a string of members suggesting in recent weeks that rates will stay on hold at 2 per cent for the foreseeable future.

Other economic news to watch out for includes data on services and manufacturing; the Nationwide's consumer confidence report for last month; and the British Retail Consortium's June sales monitor. Expect yet more gloomy news here.

As the summer holidays loom, the corporate newsflow eases off. But it will still prove a busy week for the City. As well as the central banks and the G8 (which the markets will be watching for any reference to the effects of high oil prices), there will be several other announcements. They include a court case, a funding row, a spate of trading updates and some gas, which should occupy City dwellers mourning the end of the corporate knees-ups at Wimbledon.

On Friday, former Transport Secretary Stephen Byers is expected to take the stand in the Railtrack hearing. The court case has been brought against the Government by 49,000 private investors, who claim Mr Byers abused his powers to force the listed company into administration - charges the Government denies.

Staying with politics and business, and ministers will come under renewed pressure to hand over £380m to Airbus this week. Labour MPs Mark Tami and Doug Naysmith will hold meetings with Trade and Industry Secretary Alan Johnson and Industry Minister Alun Michael to urge them to give the aid, for the development of a new jet, to the European aerospace company.

They will argue that it will safeguard and generate thousands of jobs at Airbus's facilities at Filton, near Bristol, and Broughton, in North Wales. The news comes as tensions between the Department of Trade and Industry and the Treasury are understood to be increasing over the issue.

As for corporate news, a number of heavyweight names will update investors on trading, including BP and Diageo. The drinks giant is likely to reveal that the US remains its main driver but that trading conditions are tough in Europe. Any comments on Pernod Ricard's acquisition of Allied Domecq will be eagerly sought.

As for BP, it is one of a handful of companies actually celebrating the surging cost of crude, and the giant should indicate particularly good results in the upstream, exploration and production businesses.

Others updating investors on trading include bookmaker William Hill, while pubs and brewing business Greene King and supermarket chain Somerfield will be publishing results.

Somerfield is being wooed by property tycoons Richard and Ian Livingstone and Robert Tchenguiz, who is backed by Icelandic retailer Baugur. Another property group, Topland, is also interested, while United Co-op recently pulled out of the running.

Somerfield first announced at the beginning of the year that it had received a takeover approach, so at these full-year figures, investors will be desperate for any further news on how talks are (slowly) progressing. As for the numbers, underlying trading - in keeping with the rest of the high street - is likely to be poor with pre-tax profits expected to be flat at around £55m.

And finally, summing up a mixed week, tomorrow sees the first shipment of liquid gas to the UK for 20 years. It will arrive at the Isle of Grain in the Thames, where a £500m liquefied natural gas (LNG) terminal, to be used by BP and Algeria's Sonatrach, will be completed this month. The terminal will be able to handle 4 per cent of the UK's average gas consumption.

CALENDAR

Tomorrow 4

UK: Results: (final) Begbies Traynor Group, Total Systems.

Tuesday 5

UK: Results: (F) Northgate; (interim) Alphameric, Cobra Bio-Manufacturing.

Wednesday 6

UK: Results: (F) Angle, Clarity Commerce Solutions, DTZ Holdings, Greene King, Kleeneze, Somerfield, Vega Group; (I) Access Intelligence.

Thursday 7

UK: Results: (F) Ashtead Group, Samuel Heath & Sons; (I) Kensington Group, Terrace Hill Group.

Friday 8

UK: Results: none scheduled.