The Bank of England's Monetary Policy Committee has held borrowing costs steady for the 14th month in a row, resisting pressure to cut interest rates despite increased signs of gloom on Britain's high streets.
The decision to leave the benchmark lending rate at a 39-year low of 4% this month marks the longest period of steady rates since the MPC's conception in 1997 and was probably made for fear of further stoking the housing boom.
Although the no-change decision was widely expected, the UK central bank had been facing growing calls to cut rates amid signs that the global economy is faltering and that British retailers suffered a dismal Christmas trading period.
Poor Christmas trading results have sparked fears that consumers, the economy's main prop in recent years, have curbed their spending under the threat of war and job losses.
But the MPC, which has long predicted and desired a slowdown in consumer spending, is unlikely to be too worried yet. It may also have taken some comfort from news that house price growth may have slowed in December.
The Halifax, Britain's biggest mortgage lender, sowed confusion earlier today after it revealed that its index of house prices dropped dramatically in December but then added this was due to its having overstated prices for most of last year.
Looking ahead, economists say the MPC may still have to cut interest rates if the global economy does take a turn for the worse and consumer spending starts slowing sharply. That is quite a change from two months ago when many economists were predicting that the next move in borrowing costs would be up after a number of Bank of England policymakers warned that consumer debt levels posed an immediate threat to the economy.
Since then, however, anecdotal evidence that retailers suffered a miserable Christmas, weakness in the global economy and the uncertainty caused by the threat of war with Iraq have pushed back thoughts of rate rises and put cuts back on the agenda.
Data in the last few days has done little to dispel the gloom. Last week, the Chartered Institute of Purchasing and Supply's survey on manufacturing industry showed the sector shrank for the first time in five months in December.
Exporters are being increasingly hit by sterling's rapid appreciation against the dollar, up nearly 4% in a month. Service firms fared little better, according to CIPS. Its survey on Monday showed the sector managed to grow in December but at the slowest rate in 10 months.
Meanwhile, business failures have reached levels not seen since the early 1990s recession and job losses have been mounting, particularly in the financial services industry.
