TOO HIGH:

Interest rate cut signalled after slump on high street (Gary Duncan, 5/12/05, Times of London)

THE Bank of England yesterday opened the door to a cut in interest rates to shore up the economy as its Governor admitted that the severity of the abrupt high street downturn had taken it by surprise.

After a two-week deluge of bleak news over consumer spending, including a report of the sharpest fall in retail sales for six years, Mervyn King attempted to quell mounting fears over prospects. But the Governor conceded that consumers’ sudden retreat from the shops had caught the Bank off guard.

There was “no doubt that the speed at which the slowdown in retail spending occurred did come as a bit of a surprise”, Mr King said.

Just days after Labour was returned to power after fighting a campaign founded on claims of a strong economy, the Bank also dealt a double blow to Gordon Brown. It threw its weight behind City doubts over the Chancellor’s rosy economic forecasts, and also pinned part of the blame for the consumer downturn on higher taxes.