However, recently published economic data suggest that a further interest rate cut some time in the next few months is on the cards. An unexpected 0.7% m/m fall in manufacturing output in December underlined the current weakness in the UK's industrial sector. With domestic demand holding up reasonably well, the weakness in output represents firms' response to the combination of uncomfortably high stock levels and fading export demand. Given that the outlook for the US and continental Europe remains extremely subdued, the domestic manufacturing sector is unlikely to rebound in the short-term.
Signs of higher costs and prices in the economy would dissuade the Chancellor from any further interest rate cuts. However, the publication of last month's producer price data this morning suggests that inflation continues to ease at the factory gate, which bodes well for the price consumers pay for goods in the shops.