The Office of National Statistics (ONS) has released figures that show retail sales rose by 1% from January and by 5.5% from this time last year. The unexpected increase was attributable to higher food sales during the month.

The figures support the Bank of England’s (BoE) decision to keep interest rates on hold and that the threat of rising inflation is not going away. It also raises the question as to whether the man on the street is concerned about the credit crunch or whether it’s merely something that the boys and girls in The City get excited about.

The Bank of England’s Monetary Policy Committee (MPC) voted 7 - 2 in favour of interest rates remaining on hold at 5.25%., citing the need to focus on inflation as the reason for the decision. The two dissenting voters wanted a quarter point cut to follow the 0.25% cut in February.

The news that there was mixed views in the committee, together with the aggresive 0.75% cut in the US could pave the way for a cut in April, a month sooner than many commentators had originally suggested.

The Bank of England’s Monetary Policy Committee (MPC) has kept rates on hold at 5.25%. The decision was widely expected by analysts who are predicting a further rate cut in May and possibly another cut later in the year.

Keeping rates at 5.25% could well have been a close call by the Committee as they had a real mixed bag of data and performance indicators to work with. House prices and mortgage approvals continue to slow, whilst price increases on food and fuel remain high. The balancing act has resulted in a ‘wait and see’ approach and so that’s what we’ll need to do.

Kate Barker, a member of the Bank of England’s Monetary Policy Committee, warned that the greatest pressures on the economy stemmed from falling housing prices and a reduction in mortgage approvals. Adding that the Bank could not stop the impact of these pressures in the short term.

 There is a concern that the credit crunch goes deeper than the BoE predicts, leading to the realisation of these concerns but would send some households into negative equity. If this were to happen, people’s willingness to spend would diminish leading to a slowdown across the economy.

The Bank must surely now act quickly and cutt interest rates again in March to head off such outcomes as best as possible.

The Bank of England’s Monetary Policy Committee (MPC) voted in favour of the 0.25% rate cut in February by 8-1. The majority vote supports the view that the Bank deems the credit crunch and slowing housing market to carry greater weight than the inflationary pressures caused by higher food and fuel prices.

Commentators believed that the prospect of future rate cuts were diminishing but this latest report and level of majority suggests that a further two or three 0.25% cuts in the near future could be possible.

The Bank of Englande governor Mervyn King said that the bank faced a “difficult balancing act” and it was “the outlook for inflation, in the medium term” that the central bank’s Monetary Policy Committee (MPC) would remain focused on.

Despite the economic slowdown, falling house prices and mortgage approvals, inflation could reach 3% this year. This means the Bank will not be in a rush to cut interest rates, nor will they go as far as the market hopes. Some analysts still believe that rates could drop to 4.5% by the end of the year but this latest announcement by the Bank would suggest otherwise.

A report by the Office for National Statistics (ONS) shows annual output price inflation reaching 5.7% in January, up from 5% in December. This is the highest rate of inflation for 16 years. The reason is the higher price paid for raw materials which has increased by 18.7% over the past twelve months.

The increasing inflation figure is likely to feature heavily in the Bank of England’s interest rate decision, making rate cuts in the near future less likely. This is despite the slowing economy, fall in house price inflation and mortgage approvals.