View from City Road: Chancellor should act now on rates

The money supply figures fuel the belief that Britons have engaged in a Christmas spending spree to rival the glory days of the late 1980s. The markets have therefore concluded that the Chancellor is probably spending his Far Eastern jaunt engaged in more interesting pursuits than the plotting of an early cut in base rates.

But the Treasury was careful to caution that a rise in the amount of cash in the economy and the enthusiastic effusions of assorted department store managers are not an infallible indicator that the official retail sales data will be quite as upbeat. A poor number - which could reflect either inaccurate seasonal adjustment or the concentration of the spending spree in a small part of the month - could rekindle hopes of lower rates.

The Chancellor would no doubt greet this stoically and rightly point to the uncertainties. But he should safeguard recovery by cutting rates now to pre-empt April's tax increases. To forgo an early cut would not suggest prudence, merely a reluctance to raise rates again when the occasion demands.